THE
LAW of work
Second Edition
David j. Doorey
Copyright © 2020 Emond Montgomery Publications
07/18/2020 - tp-dd95260e-c8ad-11ea-a652-024 (temp temp) - The Law of Work
The Law of Work
Second Edition
David J. Doorey
Toronto, Canada 2020
Copyright © 2020 Emond Montgomery Publications
07/18/2020 - tp-dd95260e-c8ad-11ea-a652-024 (temp temp) - The Law of Work
Copyright © 2020 David Doorey.
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Library and Archives Canada Cataloguing in Publication
Title: The law of work / David Doorey.
Names: Doorey, David J., author.
Description: Second edition. | Includes index. | Revision of: The law of work.—Complete edition—Toronto,
Canada : Emond Publishing, 2017.
Identifiers: Canadiana 20200155784 | ISBN 9781772556186 (softcover)
Subjects: LCSH: Labor laws and legislation—Canada—Textbooks. | LCGFT: Textbooks.
Classification: LCC KE3109 .D66 2020 | LCC KF3320.ZA2 D66 2020 kfmod | DDC 344.7101—dc23
Copyright © 2020 Emond Montgomery Publications
07/18/2020 - tp-dd95260e-c8ad-11ea-a652-024 (temp temp) - The Law of Work
Brief Contents
Contents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
v
Preface . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . xxi
About the Author . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . xxv
The Law of Work: A Timeline . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . xxvii
PART I The Law of Work: Themes, Frameworks,
and Perspectives
Chapter 1
Chapter 2
Chapter 3
Chapter 4
Canadian Law of Work in a Nutshell . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
A Framework for Analyzing the Law of Work . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Key Perspectives That Shape the Law of Work . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
What Is Employment? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Selected Cases: Part I . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3
17
35
53
69
PART II The Common Law Regime
Chapter 5
Chapter 6
Chapter 7
A Brief History of the Common Law Model of Employment . . . . . . . . . . . . . . . . . . . . . . . . . . .
The Job Recruitment and Hiring Process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
The Requirements to Create and Modify an Employment
Contract . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expressed Terms of Employment Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Implied and Ancillary Employment Contract Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Termination by an Employer with “Reasonable Notice” . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Termination by “Frustration” . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Summary Dismissal: Termination for Cause Without Notice . . . . . . . . . . . . . . . . . . . . . . . . . . .
Chapter 8
Chapter 9
Chapter 10
Chapter 11
Chapter 12
Chapter 13“You Forced Me to Quit!”: The Special Case of Constructive
Dismissal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Chapter 14 Damages in Wrongful Dismissal Lawsuits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Chapter 15 “I Quit!”: Termination of the Employment Contract by the
Employee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Chapter 16 Tort Law and the Employment Relationship . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Selected Cases: Part II . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
73
87
97
113
133
153
169
179
201
217
237
247
265
PART III The Regulatory Regime
Chapter 17
Chapter 18
Introduction to the Regulatory Regime . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Wage Regulation and Pay Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
271
285
iii
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iv Brief Contents
Chapter 19
Chapter 20
Chapter 21
Chapter 22
Chapter 23
Chapter 24
Chapter 25
Chapter 26
Chapter 27
Regulating Hours of Work, Time Off, and Overtime . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Regulating the End of Employment Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Introduction to Human Rights at Work . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
The Two-Step Human Rights Model and the Prohibited
Grounds of Discrimination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
The Bona Fide Occupational Requirement, the Duty to
Accommodate, and Other Discrimination Defences . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Occupational Health and Safety and Workers’ Compensation . . . . . . . . . . . . . . . . . . . . . . . . . .
The Right to Work: Immigration and Mobility Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Privacy Law at Work . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Globalization and the Law of Work: International Labour
Law and Trade Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Selected Cases: Part III . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
305
321
337
351
373
391
407
423
439
455
PART IV The Collective Bargaining Regime
Chapter 28
Chapter 29
Chapter 30
Chapter 31
Chapter 32
Chapter 33
Chapter 34
Chapter 35
Chapter 36
Chapter 37
Chapter 38
Introduction to the Collective Bargaining Regime and the
Canadian Labour Movement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
A Brief History of Labour and the Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Why Do Workers Join Unions, and What Effects Do Unions
Have on Business? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
The Unionization Process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unfair Labour Practices and the Right to Organize . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Collective Bargaining and the Making of a Collective
Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
The Law of Industrial Conflict . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
The Collective Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Grievances, Labour Arbitration, and “Just Cause” for Discipline
in the Unionized Workplace . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
The Regulation of Unions: Legal Status, the Duty of Fair
Representation, and Decertification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Public Sector Labour Relations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Selected Cases: Part IV . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
459
475
491
503
525
541
557
585
611
643
661
677
PART V The Canadian Charter of Rights and Freedoms
and Work
Chapter 39
The Canadian Charter of Rights and Freedoms
and Work . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Selected Cases: Part V . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
681
705
Glossary
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . GL:707
Index
Credits
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . IN:721
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . CR:733
Copyright © 2020 Emond Montgomery Publications
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Contents
Brief Contents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
iii
Preface . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
xxi
Acknowledgments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . xxii
Dedication . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . xxiii
For Instructors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . xxiii
About the Author . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . xxv
Contributors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . xxv
The Law of Work: A Timeline . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . xxvii
PART I The Law of Work: Themes, Frameworks,
and Perspectives
CHAPTER 1
Canadian Law of Work in a Nutshell . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3
I.Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
II. The Three Regimes of Work Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
A. The Common Law Regime (Part II of This Text) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
B. The Regulatory Regime (Part III of This Text) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
C. The Collective Bargaining Regime (Part IV of This Text) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
III. Chapter Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Questions and Issues for Discussion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Exercise . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Notes and References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3
4
4
9
11
12
13
13
14
CHAPTER 2
A Framework for Analyzing the Law of Work . . . . . . . . . . . . . . . . . . . . . . .
I.Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
II. Law Is What Law Does . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
III. A Framework for Analysis of the Law of Work . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
A. The Work Law Subsystem . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
B. External Inputs and the External Feedback Loop . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
IV. Chapter Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Questions and Issues for Discussion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Exercise . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Notes and References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
17
17
18
20
20
26
29
31
31
31
v
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vi Contents
CHAPTER 3
Key Perspectives That Shape the Law of Work . . . . . . . . . . . . . . . . . . . . . .
I.Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
II. The Main Perspectives That Shape the Law of Work . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
A. The Neoclassical Perspective . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
B. The Managerialist Perspective . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
C. The Industrial Pluralist Perspective . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
D. The Critical Reformist Perspective . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
E. The Radical Perspective . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
III. Chapter Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Questions and Issues for Discussion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Exercises . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Notes and References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
35
35
38
38
41
43
46
47
48
48
49
49
CHAPTER 4
What Is Employment? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
I.Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
II. Legal Tests for Determining Employment Status . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
A. The Common Law Tests for Employment Status . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
B. Employment Status in the Regulatory and Collective Bargaining Regimes . . . . . . . . . . . . . . . . . . . . . .
III. Is the Distinction Between Employee and Independent Contractor Appropriate? . . . . . . . . . . . . . . . . . . . .
IV. Chapter Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Questions and Issues for Discussion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Notes and References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Selected Cases: Part I . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
53
53
54
56
59
63
64
64
66
69
PART II The Common Law Regime
CHAPTER 5
A Brief History of the Common Law Model of Employment . . . . . . . . . . . . . . . .
73
I.Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
II. Master and Servant Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
A. English Master and Servant Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
B. Master and Servant Law in the Canadian Colonies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
III. The Common Law of Employment Contracts in the 19th Century . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
A. The Common Law of Employment Contracts in 19th-Century England . . . . . . . . . . . . . . . . . . . . . . . . . .
B. The Common Law of Employment Contracts in 19th-Century Canada . . . . . . . . . . . . . . . . . . . . . . . . . .
C. Key Developments in the 20th Century . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
IV. Chapter Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Questions and Issues for Discussion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Notes and References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
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73
74
76
78
78
80
81
81
82
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CHAPTER 6
The Job Recruitment and Hiring Process . . . . . . . . . . . . . . . . . . . . . . . . . . .
I.Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
II. The Common Law and Discrimination in Job Recruitment and Hiring . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
III. Common Law Torts That Apply to Job Recruitment and Hiring . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
A. Tort of Deceit or Fraudulent Misrepresentation by a Prospective Employer . . . . . . . . . . . . . . . . . . . . . .
B. Tort of Negligent Misrepresentation by a Prospective Employer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
C. Fraudulent or Negligent Misrepresentation by a Job Applicant . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
IV. Chapter Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Questions and Issues for Discussion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Exercise . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Notes and References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
87
87
88
88
89
90
91
93
93
94
94
CHAPTER 7
The Requirements to Create and Modify an Employment
Contract . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
97
I.Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
II. The Requirements to Create a Legally Enforceable Employment Contract . . . . . . . . . . . . . . . . . . . . . . . . . . .
A. Capacity to Enter into a Contract . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
B. Intention to Create a Legally Enforceable Contract . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
C.Three Elements of a Contract: Offer, Acceptance, and Mutual Consideration . . . . . . . . . . . . . . . . . . . . .
III. Making Modifications to an Employment Contract . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
A. Contract Amendments When the Employee Agrees to the Change . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
B. Modifications When the Employee Does Not Agree to the Change . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
IV. Chapter Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Questions and Issues for Discussion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Notes and References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
97
98
98
98
100
102
103
107
109
109
110
CHAPTER 8
Expressed Terms of Employment Contracts . . . . . . . . . . . . . . . . . . . . . . . .
I.Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
II. Interpreting “Ambiguous” Contract Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
III. Sources of Employment Contract Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
A. Restrictive Covenant Clauses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
B. Termination of Contract Clauses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
IV. Chapter Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Questions and Issues for Discussion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Exercise . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Appendix : Sample Employment Contract . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Notes and References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
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113
114
115
116
118
125
125
126
127
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CHAPTER 9
Implied and Ancillary Employment Contract Terms . . . . . . . . . . . . . . . . .
I.Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
II. Implied Contract Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
A. On What Basis Do Judges Imply Contract Terms? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
B. How Judges Use Implied Terms to Shape Employment Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
C. Implied Terms That Regulate the Conduct of Employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
D. Implied Terms That Regulate the Conduct of Employers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
III. Contract Terms Found in Ancillary Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
IV. Chapter Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Questions and Issues for Discussion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Exercise . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Notes and References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
133
133
134
134
136
138
142
145
147
147
148
149
CHAPTER 10
Termination by an Employer with “Reasonable Notice” . . . . . . . . . . . . .
I.Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
II. Employee Vulnerability and the Rules Governing Termination of Employment Contracts . . . . . . . . . . . . . .
III. A Brief History of the Origins of Implied Reasonable Notice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
IV. How Modern Canadian Courts Assess an Employer’s Duty to Provide Reasonable
Notice of Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
A. The “Bardal Factors” . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
B. Summary of the Bardal Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
C. Other Factors Affecting the Length of Reasonable Notice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
IV. Chapter Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Questions and Issues for Discussion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Exercise . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Notes and References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
153
153
155
156
158
159
160
165
166
166
167
167
CHAPTER 11
Termination by “Frustration” . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
I.Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
II. The Implications of a Finding of Frustration of Contract . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
III. The Test for Frustration of Contract . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
IV. Frustration Due to Illness or Disability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
A. What Medical Evidence Is Relevant in Assessing Permanent Disability? . . . . . . . . . . . . . . . . . . . . . . . . .
B. Does Frustration of Contract Apply When a Contract Provides for Sickness and
Disability Benefits? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
C. Is the Duty to Accommodate a Disabled Worker a Precondition for Frustration
of Contract? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
V. Chapter Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
169
169
169
170
171
171
172
173
175
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Questions and Issues for Discussion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Notes and References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
175
176
CHAPTER 12
Summary Dismissal: Termination for Cause Without Notice . . . . . . . . .
I.Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
II. The Basic Legal Principles Applied to Summary Dismissal Cases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
A. The Proportionality Test: McKinley v. BC Tel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
B. Can the Employer Rely on Evidence of Employee Misconduct Learned After the
Decision to Terminate the Employee? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
C. Single Wrongful Acts Versus “Cumulative Just Cause” . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
D. Employer Condonation of Employee Misconduct . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
E. Specific Penalty Clauses in Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
III. Common Grounds for Summary Dismissal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
A. Dishonesty and Conflict of Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
B. Gross Incompetence and Safety Violations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
C. Breach of Faithful Service to the Employer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
D. Insubordination and Insolence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
E. Harassment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F. Violence and Threats of Violence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
G. Absenteeism and Lateness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
H. Off-Duty Conduct . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
I. Inappropriate Use of Employer Technology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
J. Intoxication at Work . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
IV. Chapter Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Questions and Issues for Discussion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Exercise . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Notes and References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
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179
180
180
182
183
185
185
185
186
186
186
188
188
190
190
191
192
193
193
194
195
195
CHAPTER 13
“You Forced Me to Quit!”: The Special Case of Constructive
Dismissal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
I.Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
II. The Legal Concept of “Constructive Dismissal” . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
A. Constructive Dismissal Based on Employer Behaviour That May Not Breach a
Term of the Contract but That Makes Continued Employment “Intolerable” . . . . . . . . . . . . . . . . . . . . . .
B. Constructive Dismissal Based on Substantial Breach of an Essential Term
of the Contract . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
III. Common Scenarios That Give Rise to a Constructive Dismissal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
A. Changes to an Employee’s Compensation and Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
B. Changes to an Employee’s Job Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
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203
204
205
205
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C. Reassignment of an Employee to a Different Work Location . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
D. “Don’t Come to Work!”: Unpaid Disciplinary Suspensions, Temporary Layoffs, and
Administrative Leaves or Suspensions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
E. Employee Harassment or a Poisoned Work Environment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
IV. Employee Acceptance and Condonation of the Employer’s Repudiation of Contract . . . . . . . . . . . . . . . . . .
V. Chapter Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Questions and Issues for Discussion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Exercise . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Notes and References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
208
209
210
211
212
212
213
213
CHAPTER 14
Damages in Wrongful Dismissal Lawsuits . . . . . . . . . . . . . . . . . . . . . . . . . .
I.Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
II. General Theory of Damages and Absence of “Specific Performance” . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
III. Categories of Damages in Wrongful Dismissal Lawsuits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
A. Compensatory (or Ordinary) Damages . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
B. Aggravated Damages for Bad Faith in the Manner of Dismissal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
C. Punitive Damages . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
IV. The Duty to Mitigate Compensatory Damages . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
A. The Standard of Mitigation Required . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
B. Mitigation with a Job Offered by the Former Employer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
V. Chapter Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Questions and Issues for Discussion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Exercise . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Notes and References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
217
217
217
219
219
222
225
226
227
227
229
230
230
231
CHAPTER 15
“I Quit!”: Termination of the Employment
Contract by the Employee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
I.Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
II. The Test for Assessing Whether an Employee Has Resigned . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
III. The Requirement for an Employee to Give an Employer Notice of Termination . . . . . . . . . . . . . . . . . . . . . . .
IV. Calculating Damages When an Employee Fails to Give Proper Notice of Termination . . . . . . . . . . . . . . . . . .
V. Chapter Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Questions and Issues for Discussion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Notes and References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
237
237
238
239
242
243
243
244
CHAPTER 16
Tort Law and the Employment Relationship . . . . . . . . . . . . . . . . . . . . . . . .
I.Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
II. What Is a Tort? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
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247
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III. An Employer’s Vicarious Liability for Tort Damages Caused by an Employee . . . . . . . . . . . . . . . . . . . . . . . . .
IV. Common Torts That Apply to Work . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
A. Intentional Torts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
B. Non-intentional Torts (Known as “Negligence”) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
V. Tort Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
VI. Chapter Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Questions and Issues for Discussion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Exercise . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Notes and References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Selected Cases: Part II . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
248
250
250
254
258
259
260
260
261
265
PART III The Regulatory Regime
CHAPTER 17
Introduction to the Regulatory Regime . . . . . . . . . . . . . . . . . . . . . . . . . . . .
I.Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
II. Jurisdiction: The Power to Regulate Work . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
III. The Process of Law Making: Statutes and Regulations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
IV. Expert Administrative Tribunals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
V. What Regulatory Standards Are of Interest in the Law of Work? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
VI. Chapter Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Questions and Issues for Discussion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Exercise . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Notes and References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
271
271
273
274
277
279
281
281
281
282
CHAPTER 18
Wage Regulation and Pay Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
I.Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
II. The Scope of Wage Regulation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
A. Wage Regulation Applies to Employment Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
B. Many Employees Are Excluded from Wage Regulation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
C. Wage Laws Vary by Occupation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
III. Minimum Wage, Wage Freeze, and Maximum Wage Legislation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
A. Minimum Wage Legislation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
B. Wage Freeze or Restraint Legislation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
C. Maximum Wage Legislation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
IV. Regulating Wage Discrimination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
A. Equal Pay for the Same Job (Equal Pay Laws) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
B. Equal Pay for Equal Work and Equal Value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
285
285
286
286
286
287
288
288
290
292
292
294
295
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V. Chapter Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Questions and Issues for Discussion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Exercise . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Notes and References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
299
300
300
301
CHAPTER 19
Regulating Hours of Work, Time Off, and Overtime . . . . . . . . . . . . . . . . .
I.Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
II. A (Very) Brief History of Working Time Laws in Canada . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
III. The Justifications for and Limitations of Contemporary Working Time Regulation . . . . . . . . . . . . . . . . . . . .
IV. Contemporary Working Time Regulation in Canada . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
A. Hours of Work and Overtime Pay . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
B. Statutory Holidays, Paid Time Off (Vacation Pay), and Food Breaks . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
C. Leaves of Absence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
V. Chapter Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Questions and Issues for Discussion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Notes and References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
305
305
306
308
309
309
313
316
317
317
318
CHAPTER 20
Regulating the End of Employment Contracts . . . . . . . . . . . . . . . . . . . . . .
I.Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
II. Statutory Minimum Notice of Termination Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
A. Common Features of Statutory Notice of Termination Provisions in Canada . . . . . . . . . . . . . . . . . . . . . .
B. The Interrelationship Between Statutory and Contractual Notice of Termination Requirements . . . . .
III. Severance Pay (Ontario and Federal) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
IV. Statutory Protection Against Unfair Dismissal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
A. Laws That Prohibit Dismissals Contrary to Public Policy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
B. Unjust Dismissal Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
V. Chapter Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Questions and Issues for Discussion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Notes and References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
321
321
322
322
327
329
330
330
331
332
333
333
CHAPTER 21
Introduction to Human Rights at Work . . . . . . . . . . . . . . . . . . . . . . . . . . . .
I.Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
II. A (Very) Brief History of Human Rights Law in Canada . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
III. Common Features of the Canadian Human Rights Model . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
A. Anti-Discrimination Provisions Apply to the Entire Life Span of the
Employment Relationship . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
B. Human Rights Commissions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
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338
340
340
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C. The Process for Filing, Investigating, and Litigating Human Rights Complaints . . . . . . . . . . . . . . . . . . .
D. The Remedial Powers of Human Rights Tribunals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
E. The Limits on Raising Human Rights Complaints in Multiple Legal Forums . . . . . . . . . . . . . . . . . . . . . .
IV. What Is Discrimination? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
V. Chapter Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Questions and Issues for Discussion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Notes and References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
343
343
345
345
347
347
348
CHAPTER 22
The Two-Step Human Rights Model and the Prohibited
Grounds of Discrimination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
I.Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
II. A Two-Step Model for Analyzing Human Rights at Work . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
III. The Prohibited Grounds of Discrimination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
A.Disability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
B.Sex . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
C. Race, Colour, Ethnic Origin (or Place of Origin), Nationality, Ancestry . . . . . . . . . . . . . . . . . . . . . . . . . . .
D.Age . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
E. Religion or Creed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F. Marital Status, Family Status (and Civil Status in Quebec) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
G. Sexual Orientation, Gender Identity, and Gender Expression . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
H. Political Opinion or Belief . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
I.Language . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
J. Source of Income, Social Condition, or Receipt of Public Assistance . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
K. Record of Offence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
IV. Chapter Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Questions and Issues for Discussion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Notes and References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
351
351
352
354
357
359
361
362
363
364
366
366
366
366
367
367
367
368
CHAPTER 23
The Bona Fide Occupational Requirement, the Duty to
Accommodate, and Other Discrimination Defences . . . . . . . . . . . . . . . .
I.Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
II. The Bona Fide Occupational Requirement (BFOR) Defence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
A. The 1999 “Meiorin Test” for the BFOR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
B. The Duty to Accommodate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
III. The Special Interest Organization Defence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
IV. Other Defences to Prima Facie Discrimination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
A. The Nepotism Defence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
B. The Personal Care Attendant Defence, Homeworker Defence, and Domestic
Worker Defence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
373
373
374
375
376
384
386
386
387
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C. The Bona Fide Pension or Insurance Plan Defence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
D. The Special Program Defence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
V. Chapter Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Questions and Issues for Discussion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Notes and References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
387
387
388
388
389
CHAPTER 24
Occupational Health and Safety and Workers’ Compensation . . . . . . .
I.Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
II. A (Very) Brief History of Injury Compensation and Prevention Laws in Canada . . . . . . . . . . . . . . . . . . . . . .
III. Contemporary Injury Prevention Legislation: Occupational Health and Safety
Legislation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
A. The Internal Responsibility System (IRS) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
B. The Employer’s Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
C. The Rights and Duties of Workers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
D. OHS Enforcement and Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
IV. The Criminal Liability of Organizations for Workplace Injuries and Death . . . . . . . . . . . . . . . . . . . . . . . . . . .
V. Workers’ Compensation Legislation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
A. Injury Causation and the No-Fault Principle . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
B. Funding Workers’ Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
C. Wage-Loss, Rehabilitation, and Survivor Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
D. The Return to Work . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
VI. Chapter Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Questions and Issues for Discussion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Notes and References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
391
391
392
393
394
394
394
397
398
399
399
400
401
401
402
402
403
CHAPTER 25
The Right to Work: Immigration and Mobility Law . . . . . . . . . . . . . . . . . .
I.Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
II. A Brief History of Migrant Workers in Canada . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
III. Migrant Workers and “Flexible Labour” . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
IV. Immigration Status in Canada . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
A. Citizens, Permanent Residents, and Foreign Nationals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
V. Temporary Work Permit Programs in Canada . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
A. Live-in Caregiver Program . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
B. Seasonal Agricultural Worker Program . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
C. Temporary Foreign Worker Program . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
D. Open Work Permits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
VI. The Precarious Status of the Migrant Worker . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
407
407
407
409
411
411
412
412
413
413
415
415
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VII. Employment-Related Legal Entitlements and Migrant Workers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
VIII. Federal Regulation of Employers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
IX. Chapter Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Questions and Issues for Discussion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Notes and References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
416
418
419
419
419
CHAPTER 26
Privacy Law at Work . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
I.Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
II. Privacy Legislation in Canada . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
A. Provincial Privacy Acts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
B. Federal Information Privacy Law: The Federal Personal Information
Protection and Electronic Documents Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
C. Human Rights Statutes and Privacy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
III. The Common Law and Privacy at Work . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
A. Tort Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
B. Contract Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
IV. Privacy in the Unionized Workplace . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
V. Recent Case Law Related to Privacy and “Reasonableness” . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
VI. Chapter Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Questions and Issues for Discussion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Notes and References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
423
423
425
425
426
429
430
430
432
433
434
435
435
436
CHAPTER 27
Globalization and the Law of Work: International Labour
Law and Trade Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
I.Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
II. International Labour Law and the ILO . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
A. The Guiding Philosophy of the ILO . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
B. “Labour Is Not a Commodity” . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
C. What Does the ILO Do? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
III. Trade Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
A. Direct Effects of Trade Agreements on Canadian Work Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
B. Indirect Effects of Trade Agreements on Canadian Work Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
IV. Chapter Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Questions and Issues for Discussion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Exercises . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Notes and References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Selected Cases: Part III . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
439
439
440
440
441
442
444
445
448
451
451
452
452
455
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PART IV The Collective Bargaining Regime
CHAPTER 28
Introduction to the Collective Bargaining Regime and the
Canadian Labour Movement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
I.Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
II. A Brief Overview of the Common Law’s Treatment of Collective Worker Activities . . . . . . . . . . . . . . . . . . . .
III. The Outputs and Legal Institutions of the Collective Bargaining Regime . . . . . . . . . . . . . . . . . . . . . . . . . . . .
IV. Who Is Governed by the Collective Bargaining Regime in Canada? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
V. Canadian Unions Today: A Snapshot . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
VI. Chapter Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Questions and Issues for Discussion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Exercises . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Notes and References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
459
459
460
465
466
470
473
473
473
473
CHAPTER 29
A Brief History of Labour and the Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
I.Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
II. The Emerging Labour Movement: 1860s to 1910 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
A. Craft Unionism . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
B. Early Legislation Restricting Unions and Collective Worker Action: Pre-1870s . . . . . . . . . . . . . . . . . . . .
C. Early Legislation Regulating and Legitimizing Union Activity: 1870s and Beyond . . . . . . . . . . . . . . . .
D. Employer Intransigence and Increasing Worker Militancy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
E. Industrial Disputes Investigations Act, 1907 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
III. Labour in the Early 20th Century and the Interwar Years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
A. The Great Depression and the Wagner Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
B. Oshawa General Motors Strike, 1937 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
IV. The Foundations of the Modern Collective Bargaining Model: PC 1003 and the
“Rand Formula” (1940s) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
A. PC 1003 (1944): The Wagner Model Comes to Canada . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
B. The Rand Formula . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
V. Public Sector Collective Bargaining . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
VI. Chapter Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Questions and Issues for Discussion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Notes and References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
475
475
476
476
477
479
481
482
482
484
485
486
486
487
488
488
489
489
CHAPTER 30
Why Do Workers Join Unions, and What Effects Do Unions
Have on Business? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
I.Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
II. Why Do Workers Join Unions? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
491
491
492
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A. Instrumental Reasons . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
B. Economic Reasons . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
III. Other Factors That Influence the Likelihood a Worker Will Join a Union . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
A. Personal and Job Characteristics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
B. Socio-economic Status . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
C. The Work Environment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
IV. How Do Unions Affect Business Outcomes? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
A. Union Effects on a Company’s Productivity and Profits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
B. Union Effects on Employment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
C. Union Effects on Business Innovation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
D. Union Effects on Executive Compensation, Civic Engagement, and Income Inequality . . . . . . . . . . . . .
V. Chapter Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Questions and Issues for Discussion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Exercise . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Notes and References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
492
493
495
495
495
496
496
496
498
498
499
499
499
500
500
CHAPTER 31
The Unionization Process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
I.Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
II. The Pillars of the Canadian Collective Bargaining Model: Majoritarianism and Exclusivity . . . . . . . . . . . . .
III. The Union Organizing Campaign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
IV. The Union Certification Process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
A. Jurisdiction and “Trade Union” Status . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
B. Timeliness of Certification Applications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
C. Measuring Employee Support for the Union and Collective Bargaining . . . . . . . . . . . . . . . . . . . . . . . . .
V. Voluntary Recognition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
VI. Chapter Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Questions and Issues for Discussion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Notes and References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
503
503
504
504
506
506
507
508
519
519
520
521
CHAPTER 32
Unfair Labour Practices and the Right to Organize . . . . . . . . . . . . . . . . .
I.Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
II. Why a Statutory “Right to Unionize”? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
III. The Substance of Unfair Labour Practice Provisions Regulating Employer Behaviour . . . . . . . . . . . . . . . . .
A. The Intimidation and Coercion Prohibition and “Anti-Union Animus” . . . . . . . . . . . . . . . . . . . . . . . . . . .
B. The Interference and Domination Prohibition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
IV. Employer Expression Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
V. Remedies for Unfair Labour Practices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
VI. Chapter Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
525
525
525
526
527
529
532
535
537
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Questions and Issues for Discussion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Notes and References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
537
538
CHAPTER 33
Collective Bargaining and the Making of a Collective
Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
I.Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
II. The Effects of Union Certification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
III. How Collective Bargaining Works . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
IV. Types of Legal Rules Regulating Collective Bargaining . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
A. Statutory Freeze Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
B. The Duty to Bargain in Good Faith and Make Reasonable Efforts to Conclude a
Collective Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
V. Broader-Based Collective Bargaining? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
VI. Chapter Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Questions and Issues for Discussion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Notes and References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
541
541
541
542
545
545
546
552
554
554
554
CHAPTER 34
The Law of Industrial Conflict . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
I.Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
II. Mapping the Options for Resolving a Collective Bargaining Deadlock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
III. The “Economic Warfare” Route . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
A. Union and Employee Weapons: The Strike . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
B. Employer Weapons: Lockouts and Unilateral Alteration of Terms of Employment . . . . . . . . . . . . . . . . .
IV. The Interest Arbitration Route . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
V. Chapter Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Questions and Issues for Discussion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Notes and References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Appendix: City of Toronto/CUPE, 2011–2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
557
557
557
559
560
570
572
575
575
576
579
CHAPTER 35
The Collective Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
I.Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
II. The Legal Status of Collective Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
III. Regulation of Collective Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
A. Common Mandatory Collective Agreement Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
B. Default Collective Agreement Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
C. Prohibited Collective Agreement Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
IV. The Principle of “Reserved Management Rights” in Collective Agreement Interpretation . . . . . . . . . . . . . .
V. Sources of Collective Agreement Terms and Rules of Interpretation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
A. Expressed Collective Agreement Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
585
585
586
587
587
588
589
589
591
591
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B. Implied Contract Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
C. Ancillary Collective Agreement Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
VI. Chapter Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Questions and Issues for Discussion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Exercise . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Notes and References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Appendix: Sample Collective Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
594
598
600
601
601
602
605
CHAPTER 36
Grievances, Labour Arbitration, and “Just Cause” for Discipline
in the Unionized Workplace . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
I.Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
II. The Grievance Procedure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
A. Filing a Grievance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
B. Settling or Withdrawing a Grievance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
III. The Labour Arbitration Process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
IV. The Labour Arbitration Decision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
V. Labour Arbitration Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
VI. The Expanding Scope of Labour Arbitration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
VII. What Is “Just Cause” for Discipline or Dismissal in Unionized Workplaces? . . . . . . . . . . . . . . . . . . . . . . . . . . .
A. The Basic Building Blocks of “Just Cause” Arbitration Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
B. Summary of Specific Grounds for Discharge and Discipline . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
VIII. Chapter Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Questions and Issues for Discussion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Notes and References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
611
611
611
612
612
614
616
616
617
621
622
626
635
636
637
CHAPTER 37
The Regulation of Unions: Legal Status, the Duty of Fair
Representation, and Decertification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
I.Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
II. What Is the Legal Status of a Union to Sue and Be Sued in the Common Law Regime? . . . . . . . . . . . . . . . .
III. A Union’s Duty of Fair Representation (DFR) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
A. The History of the Duty of Fair Representation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
B. The Scope of the Duty of Fair Representation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
C. The Substance of the Duty of Fair Representation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
IV. The Decertification of Unions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
A. Decertification Due to Loss of Majority Employee Support . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
B. Other Reasons for Decertification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
C. The Effects of a Successful Application for Decertification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
V. Chapter Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Questions and Issues for Discussion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Notes and References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
643
643
644
645
646
646
647
651
652
655
655
657
657
658
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xx Contents
CHAPTER 38
Public Sector Labour Relations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
I. Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
II. Terminology: What Is the “Public Service”? Who Is “the Employer”? Who Is a “Public Servant”? . . . . . . . .
A. What Is the “Public Service,” and Who Is “the Employer” in Public Service? . . . . . . . . . . . . . . . . . . . . . . .
B. Who Is a “Public Servant”? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
III. Distinguishing Features of Public Sector Collective Bargaining Law and Policy . . . . . . . . . . . . . . . . . . . . . .
A. Essential Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
B. Public Sector Strike and Picketing Rules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
C. Limits on Topics That Can Be Collectively Bargained . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
D. Interest Arbitration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
E. Bargaining Unit Composition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
IV. Implications of Public Servants’ Duty of Fidelity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
V. Chapter Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Questions and Issues for Discussion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Notes and References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Selected Cases: Part IV . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
661
661
662
662
664
665
665
668
668
669
672
672
674
674
675
677
PART V The Canadian Charter of Rights and Freedoms
and Work
CHAPTER 39
The Canadian Charter of Rights and Freedoms and Work . . . . . . . . . . .
I.Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
II. What or Whom Does the Charter Govern? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
III. Understanding “Charter Challenges” . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
A. Step One: Has Government Infringed a Charter Right or Freedom? . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
B. Step Two: If an Infringement Has Occurred, Is It Justified in a Free and Democratic Society? . . . . . . . .
IV. How the Charter Has Influenced the Law of Work in Canada . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
A. The Charter and the Common Law Regime of Work Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
B. The Charter and the Regulatory Standards Regime . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
C. The Charter and the Collective Bargaining Regime . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
V. Chapter Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Questions and Issues for Discussion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Notes and References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Selected Cases: Part V . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
681
681
682
683
684
684
686
686
687
691
701
701
702
705
Glossary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . GL: 707
Index . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
IN: 721
Credits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
CR:733
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Preface
This is a different sort of law book. It was born out of frustration with existing legal
and industrial relations texts that were, to my mind, unsuitable for the vast majority of
people who study the laws that govern work in Canada. Upper-year law school students
represent a tiny fraction of Canadians who study work law in post-secondary institutions or for professional purposes. Traditional legal texts are too dense with case law for
readers who are new to the field. On the other hand, law books written specifically for
legal, business, human resource, and labour relations practitioners lack broader context
and, to quote my favourite law teacher, Harry Arthurs, “often degenerate into the mere
recitation of rules and … contribute neither to genuine interdisciplinary insights nor to
greater citizen involvement in the law.”
The Law of Work is written as an invitation to non-lawyers and lawyers alike to engage with the fascinating world of labour and employment law in a more accessible and
contextual manner than is typical with most legal texts. It is the first Canadian law text
to examine at length all three regimes of work law—common law, regulatory standards,
and collective bargaining—from an interdisciplinary perspective that draws on economics, sociology, industrial relations, history, labour, and management studies. The book
is written in plain language for easy use in undergraduate and graduate university and
college courses outside the law faculty. The first edition was adopted by instructors at
universities and colleges across the country in business, human resources, industrial
relations, and labour studies. The book has also been adopted for use in Canadian law
schools in labour and employment law courses. The extensive endnotes are designed to
permit instructors in law schools to easily create a supplement for the text with additional case law and secondary materials.
We have reduced the number of chapters from the first edition by merging several
chapters and moving a few chapters to an online supplement. This was done to reduce
the overall length of the book. Additional revisions have been made based on suggestions
from instructors who have adopted the book. The second edition text moves quickly,
using many short chapters that cut through huge swaths of historical and contemporary legal developments, allowing instructors to select the topics and level of detail they
wish to explore.
Part I (Chapters 1 – 4) introduces some key themes, frameworks, and perspectives that
inform the parts that follow. The “framework” in Chapter 2 maps the interrelationships
that exist throughout the various components of the “law of work” system. This is a
descriptive exercise intended to introduce to a new audience what everyone in the field
knows: that we cannot understand the laws and norms that govern work in isolation
from the broader social, political, cultural, and economic contexts in which they emerge
and function. This observation has long guided industrial relations teaching and scholarship. The framework also emphasizes the interrelationships and interactions among
the three regimes of work law. A central theme of the book is that the three regimes
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xxii Preface
function together to create a unified system of law. While this is not an original insight,
few books bring the three regimes together in a coherent format.
Part II (Chapters 5–16) explores the common law regime, including contracts and
torts. Part III (Chapters 17–27) examines the regulatory regime, including protective
employment standards and broader regulation of labour markets. Three supplemental
chapters for Part III are also available for instructors who have adopted the book for
course use (see “For Instructors” section, below). They are “Intellectual Property Law
and Work” by May Cheng, Sarah Goodwin, and Mark Bowman; “Pensions, Insolvencies, Bankruptcies, and the Worker” by Simon Archer; and “Regulating Unemployment”
by David Doorey. Part IV (Chapters 28–38) considers the collective bargaining regime
and industrial relations, including how laws promote, restrain, and otherwise interact
with unions and collective bargaining processes. (Note that the chapters in Parts I and
IV are also available in a separate volume, Canadian Labour Relations: Law, Policy, and
Practice, 2nd edition, <https://www.emond.ca/CLR2>.) Finally, Part V explains the role
of the Charter of Rights and Freedoms on the laws of work. I am hopeful that this book
will mark a welcome new approach to teaching and learning about how our laws govern
the labour relationship.
This fully updated second edition introduces exciting new features, including “Applying the Law” practical exercises found at the end of most substantive law chapters. Inside
the new “Applying the Law” boxes you will find scenario-based legal problem-solving
exercises that allow students to apply the materials to real-life workplace scenarios.
Answers are provided in the Instructors’ Manual.
Acknowledgments
Many people contributed valuable research, reviewer feedback, or helpful suggestions
during the writing of this book, including Bernie Adell, Eric Tucker, Alison Braley-Rattai,
Leah Vosko, Cynthia Estlund, Michael Lynk, Rick MacDowell, Pnina Alon-Shenker,
Lorne Slotnick, Erin Kuzz, Jim Robbins, Morley Gunderson, Mark Rowlinson, Armine
Yalnizyan, Gail Misra, Rafael Gomez, Andrew Pinto, Chris Sweeney, Mitchell Doorey,
Ryan Edmonds, Jim Stanford, Awale Deria, Nick Ruhloff, Judy Fudge, Christine Sesek,
Monica Hypher, and The Junction Pigeons.
Thanks are also due to reviewers of various parts of this project: Pnina Alon-Shenker
(Ryerson University), Nicole Barnabé (University of Manitoba), Alec Gallacher (University of Toronto), Dan McGarry (Seneca College), and Chantal Westgate (McGill
University).
As noted below, several chapters in this book were written by some of Canada’s leading
scholars and practitioners in the field, and their expertise, cooperation, and enthusiasm
have been much appreciated. The book is much stronger for their contributions.
Special thanks are owed to Harry Arthurs, who is the inspiration for this text. Harry
provided helpful suggestions in relation to this project, but more generally has offered
unwavering support and encouragement since my law school days over two decades ago.
I also want to thank the Emond Publishing team for their hard work and for sharing
my vision for the book. In particular, great thanks are due to Mike Thompson and Paul
Emond for their enthusiastic support for the project and their many contributions to
the book, to my copy editor Leanne Rancourt, and to the rest of the team, particularly
Kelly Dickson, Anna Killen, Katherine Goodes, and Darryl Kamo.
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Preface xxiii
Finally, my greatest thanks are reserved for my wonderful family. I am the luckiest
man alive that fate and the alphabet placed me beside my spouse, May Cheng, at the
British Columbia call to the bar ceremony over 20 years ago. Her boundless positive
energy inspires me every day, and this book and my new career as an academic would
not have been possible without her. And, of course, to my beautiful children, Amanda
and Dylan, who make every day special.
Dedication
This book is dedicated to my parents and to my brother Stephen. We miss you.
David J. Doorey
Toronto
For Instructors
For additional information and resources, please visit the accompanying website for this
book at www.emond.ca/LW2. The Updates tab on the site provides links to the author’s
Law of Work blog, organized to reflect the thematic structure of this book, and featuring
breaking news, updates, commentary, and more.
For information on obtaining the teaching resources available to instructors who have
chosen this book for their courses, visit the For Instructors tab on the book’s website, or
contact your Emond Publishing representative for more information. These teaching
resources include PowerPoint slides, a test bank, role playing exercises and instructions
for a collective bargaining simulation, an image bank, three supplemental chapters for
Part III of this text (as described above), and more.
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About the Authors
David J. Doorey is an associate professor of work law and industrial relations at York
University and academic director of Osgoode Hall Law School’s professional part-time
LLM program, specializing in labour and employment law. He is a senior research associate at Harvard Law School’s Labor and Worklife Program, a member of the International
Committee on Harvard’s Clean Slate Project on labour law reform, and he has been a
visiting scholar at the University of Toronto Faculty of Law and Centre for Industrial
Relations and Human Resources. He is a recipient of the prestigious Dean’s Award for
Excellence in Teaching at York and is a regular media commentator on work law and
industrial relations. His scholarly articles have been published in leading Canadian
and foreign law journals, and he is articles review editor of the Canadian Labour and
Employment Law Journal. He was a recipient of the Morley Gunderson Prize and the
H.D. Woods Prize for Outstanding contributions to Canadian industrial relations and
the David Watson Memorial Award from the Queen’s Law Journal for the law journal
article making the most significant contribution to legal scholarship. His popular Law
of Work blog has been awarded the Fodden Award for the Best Law Blog in Canada and
was an inaugural inductee into the Canadian Law Blog Awards Hall of Fame in 2016.
He was called to the law bars of Ontario and British Columbia and practised labour
law on behalf of employees and unions in both provinces before returning to academia.
Professor Doorey was educated at the University of Toronto (BA, MIR), London School
of Economics and Political Science (LLM Labour Law), and Osgoode Hall Law School
(JD, PhD). He lives in Toronto’s west end and in Prince Edward County with his family
and Australian Labradoodle, and he coaches kids’ hockey.
Contributors
Simon Archer (online chapter) is a partner with Goldblatt Partners LLP and co-director
of the Centre for Comparative Research in Law and Political Economy at Osgoode Hall
Law School, York University.
Bob Barnetson (Chapter 24) is a professor of labour relations at Athabasca University.
Alison Braley-Rattai (Chapter 29) is an assistant professor in the Department of Labour
Studies at Brock University.
May Cheng (online chapter) is a partner with Osler, Hoskin & Harcourt LLP in Toronto.
Sarah Goodwin and Mark Bowman are associates with Fasken Martineau DuMoulin
LLP.
John Craig (Chapter 26) is a partner with Fasken Martineau DuMoulin LLP in Toronto.
Justine Lindner is an associate lawyer with McCarthy Tétrault LLP in Toronto.
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xxvi About the Authors
Michael Lynk (Chapter 23) is an associate professor of labour law in the Faculty of Law
at Western University.
Sarah Marsden (Chapter 25) is an assistant professor in the Faculty of Law at Thompson
Rivers University.
Claire Mummé (Chapter 5) is an assistant professor of labour law in the Faculty of Law
at the University of Windsor.
Benjamin Oliphant (Chapter 39) is a lawyer with Gall Legge Grant & Zwack LLP in
Vancouver in Vancouver and an adjunct professor in the Faculty of Law at the University
of British Columbia.
Christopher C. Rootham (Chapter 38) is a partner with Nelligan O’Brien Payne LLP
and teaches at the University of Ottawa.
Scott Walsworth (Chapter 30) is an associate professor of industrial relations at the
Edwards School of Business, University of Saskatchewan.
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The Law of Work: A Timeline
LEGEND
RED
= Regulatory
Regime
BLUE
= Collective
Bargaining
Regime
2010
GREEN = Common
Law Regime
2000
NAFTA (1992)
1990
Canada – US Free Trade
Agreement (1988)
1980
•
•
•
•
Merrifield v. Canada (Attorney General) (2019): Ont. CA rules there is no “tort of harassment” in Canadian common law (2019)
SFL v. Saskatchewan (2015): SCC recognizes a limited Charter-protected right to strike
“Gender identity” or “gender expression” added to some human rights statutes (2012 – 2015)
Jones v. Tsige (2012): Ont. CA recognizes privacy tort of “intrusion upon seclusion”
•
•
•
•
Honda Canada v. Keays (2008): SCC reforms “bad faith discharge” damages law
BC Health Services (2007): Charter protects collective bargaining
Parry Sound (2003): Labour arbitrators must apply employment-related statutes
RWDSU, Local 558 v. Pepsi-Cola Canada (2002): Secondary picketing is legal per se
• Dunmore v. Ontario (2001): Expanded scope of section 2(d) of the Charter
• McKinley v. BC Tel (2001): SCC explains test for “summary dismissal”
•
•
•
•
•
•
•
•
•
•
•
•
•
The Meiorin decision on the BFOR defence to employment discrimination (1999)
Vriend v. Alberta (1998): Sexual orientation read into human rights statutes
Wallace v. UGG (1997): Bad faith in the manner in which an employee is terminated
Farber v. Royal Trust Co. (1997): SCC explains the law of constructive dismissal
Weber v. Ontario Hydro (1995): Expanded jurisdiction of labour arbitrators
Machtinger v. HOJ Industries (1992): Statutory and common law notices
Central Okanagan School District, No. 23 v. Renaud (1992): The duty to accommodate
CADP v. Alberta (1990): Duty to accommodate religion
“Labour Trilogy” decisions (1987): No Charter right to collective bargaining, strike
First proactive pay equity acts (Manitoba, 1986; Ontario, 1987)
RWDSU, Local 580 v. Dolphin Delivery (1986): Charter and private common law disputes
OHRC v. Simpsons-Sears (1985): “Indirect discrimination” recognized
Canadian Charter of Rights and Freedoms (1982)
• Wm. Scott & Co. (Re) (1977): Arbitral test applied in “just cause” for discipline or dismissal cases
• Canadian Human Rights Act (1977)
1970
1960
ILO Equal Remuneration
Convention (1951)
ILO Convention 98 (1949)
1950
ILO Convention 87 (1948)
UN Universal Declaration of
Human Rights (1948)
Second World War (1939 – 1945)
1940
American Wagner Act (1935)
• Federal wage controls legislation for public sector and some private sector workers (1975)
• Occupational health and safety statutes
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
Maternity leave laws (early 1970s)
First duty of fair representation laws (Ontario, 1971)
Severance pay law (federal, 1970)
Woods Task Force on Labour Relations (1967)
R. v. Arthurs, Ex p. Port Arthur Shipbuilding Co. (1967): Summary dismissal without notice
Federal Public Sector Staff Relations Act (1967)
Russel Steel (1966): Reserved management rights doctrine in labour arbitration
Statutory notice of termination laws (mid to late 1960s)
Hersees of Woodstock v. Goldstein (1963): Secondary picketing is illegal per se
Ontario Human Rights Code (1962)
Canadian Bill of Rights (1960)
Bardal v. Globe & Mail Ltd. (1960): Criteria for assessing “reasonable notice”
Standard 8-hour day, 40-hour week legislation in some provinces
Canadian Labour Congress formed (1956)
Female Employees Fair Remuneration Act (Ontario, 1951)
Fair employment practices laws banning discriminatory hiring (early 1950s)
First racial discrimination laws (Ontario, 1944; Saskatchewan, 1947)
“Rand Formula” award (1946)
Paid vacation laws (1944 – 1950)
PC 1003: Template for modern collective bargaining laws (1944)
• Christie v. The York Corporation (1940): Discrimination in contract permissible
• Unemployment Insurance Act (1940)
• Carter v. Bell & Sons (Canada) Ltd. (1936): Termination with “reasonable notice”
• “On to Ottawa Trek” (1935)
• Men’s minimum wage, 8-hour day legislated in various provinces
Great Depression (1929 – 1933)
1930
ILO Minimum Wage Fixing
Convention (1928)
ILO Hours of Work Convention
(1919)
1920
• Unemployment “relief” camps (1930)
• TEC v. Snider (1925): Provinces have primary jurisdiction over work law
• First minimum wage law for men (BC, 1925)
• First 8-hour day, 48-hour week law (BC, 1923)
• Winnipeg General Strike (1919)
• Early minimum wage laws for females only (1917 – 1920)
ILO formed (1919)
• Workmen’s compensation legislation (1914 – 1920)
• Meredith Commission on Workers’ Compensation (1913)
First World War (1914 – 1918)
1910
• Industrial Disputes Investigation Act (1907): Mandatory government conciliation
• Lord’s Day Act (1906): Prohibited conducting of business on Sundays
• Railway Labour Disputes Act (1903): Early labour dispute conciliation law
1900
10
15
20
25
30
35
Union density, 1920–present (% of non-agricultural paid employees in unions)
Copyright © 2020 David Doorey. All rights reserved.
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Part I
The Law of Work:
Themes, Frameworks,
and Perspectives
CHAPTER 1
Canadian Law of Work in a Nutshell
CHAPTER 2
A Framework for Analyzing the Law of Work
CHAPTER 3
Key Perspectives That Shape the Law of Work
CHAPTER 4
What Is Employment?
Selected Cases: Part I
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CHAPTER 1
Canadian Law of Work
in a Nutshell
LEARNING OBJECTIVES
CHAPTER OUTLINE
After reading this chapter, students will be able to:
I. Introduction 3
II. The Three Regimes of Work Law 4
A. The Common Law Regime (Part II of This Text) 4
B. The Regulatory Regime (Part III of This Text) 9
C. The Collective Bargaining Regime (Part IV of This Text) 11
III. Chapter Summary 12
Questions and Issues for Discussion 13
Exercise 13
Notes and References 14
• Describe the three regimes that comprise the law of work in Canada.
• Describe the two branches of the common law that regulate work and
employment.
• Understand the levels of courts in Canada.
• Define precedent and the principle of stare decisis.
• Describe the role of the courts, governments, and expert administrative
tribunals in the law of work.
• Recognize how the concepts of freedom of contract and inequality of
bargaining power have influenced the development of the law of work
in Canada.
I. Introduction
At the beginning of a long journey, it is useful to survey a topographical map of the terrain to
come—to study the forest canopy before entering the thicket. We can see patterns from above
not apparent from the forest floor. It helps to have a sense of where we are going so that we can
anticipate what is to come. Therefore, we will begin our journey by looking down at a map of
sorts: a map of the law of work in Canada. This map charts the manner in which our legal system
regulates labour markets and the buying and selling of labour.
For over a century, legal scholars have studied these laws. In truth, though, scholars have mostly
been interested in work performed through one specific organizational form: employment. Workers can of course sell their labour through arrangements other than employment. I once contracted
with a company called High Park Building Services Inc. (or HPBS) to build me a backyard deck. It
turned out that HPBS was really just a guy named Jason Phillips who was between jobs and who
had set up a company so that he could use his carpentry skills to earn some money. Whether I hired
Jason as my employee or contracted with a company called HPBS is crucially important to how the
law treats our relationship. If Jason is my employee, then all of the laws that govern employment
considered in this text apply to our relationship. But if my contract is with the company HPBS,
maybe none of them do. It’s the same work in either case, but the legal rules that govern the work
are fundamentally different depending on how our relationship is characterized.
Whether so much should depend on this fine distinction between employment and
not employment is one of the great debates in our legal field.1 We will revisit this debate at
employment: An organizational form through which a person (employee) sells their labour power to a buyer of labour
(employer) in exchange for value and in which the relationship is governed by an employment contract.
3
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4 Part I The Law of Work: Themes, Frameworks, and Perspectives
various points throughout this text, and we will explore how the law draws the distinction
between an employee and a worker who is not an employee in Chapter 4. The reason for
mentioning the “employment” versus “not employment” distinction at this early stage is to
explain the boundaries of our map of the law of work set out in this chapter. It is a high-level
map of how Canadian law governs the employment relationship. It does so through three
distinct legal regimes: (1) the common law of employment; (2) regulatory law; and (3) collective bargaining law.
This chapter provides an overview of the key components of the legal system that governs
employment in Canada, outside of Quebec. Quebec is a special case because its legal system,
including much of the law that governs the employment relationship, is based on the French
model of civil law rather than the British-based common law system applied elsewhere in
Canada. Therefore, while we will occasionally consider cases and regulations originating in
Quebec in this text, our focus will be on the legal system that governs the rest of Canada.
II. The Three Regimes of Work Law
As noted above, the system of laws that governs employment in Canada (outside of Quebec)
consists of three distinct yet overlapping regimes (see Figure 1.1):
1. The common law regime (covered in Part II).
2. The regulatory regime (covered in Part III).
3. The collective bargaining regime (covered in Part IV).
FIGURE 1.1
Mapping the Three Regimes of Work Law
Common Law
Regime
Regulatory
Regime
Collective
Bargaining
Regime
What follows is a brief introduction to each of these regimes. The remainder of the text is
devoted to filling in the details.
A. The Common Law Regime (Part II of This Text)
The common law regime comprises both the law of contracts and the law of torts.
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Chapter 1 Canadian Law of Work in a Nutshell 5
1. The Law of Contracts
The cornerstone of the common law regime is the contract and, in particular, employment
contracts between employers and individual (non-union) employees. A contract is a legally
binding agreement in which two or more parties make promises to provide benefits to one another. In a typical employment contract, the employee promises to provide labour power in
exchange for monetary compensation in the form of a wage paid by the employer, and sometimes other benefits, such as health benefits and pension contributions. The two parties discuss,
or negotiate, what the terms of the contract will be, and their agreement becomes a contract, a
source of legal rules by which the parties are to be governed.
BOX 1.1 » TALKING WORK LAW
Understanding Legal Terminology
In Canada and the United States, the common law regime and the regulatory standards regime are
commonly grouped together under the label employment law.
The legal regime that governs collective bargaining processes, by contrast, is usually referred to
as labour law.
This text uses the terms work law and law of work synonymously to refer to the entire system of
legal rules comprising all three legal regimes.
While the law of contracts has deep roots in the common law system, dating back centuries
in Britain, the law of employment contracts dates only from the late 1800s in Canada.2 Prior to
that time, the relationship between buyers and sellers of labour was dealt with under a branch
of law known as master and servant law and through a mix of contract, property, criminal,
and tort law.3 We will learn more about master and servant law later in the text, particularly in
Chapter 5, as well as tort law. For now, it is sufficient to note that master and servant law permitted workers (“servants”) to recover unpaid wages from their employers (“masters”), but also
allowed for workers who quit a job to be imprisoned.4 Legal historians describe master and
servant law as a system of rules based on “status,” by which they mean that workers were considered subservient to their masters, and therefore subject to their masters’ largely unquestioned
authority. The master and servant regime was exported from Britain into parts of early Canada,
but by the early 1900s it had been largely supplanted by the emerging common law of the
employment contract and the principle of freedom of contract.5
“Freedom of contract” is a powerful idea. Its supporters argue that allowing employees and
employers to “negotiate” the conditions of employment leads to the fairest and most efficient
outcomes for the parties, the economy, and society as a whole. Professor Hugh Collins of Oxford
University summarized the central arguments made in favour of freedom of contract as a means
of coordinating employment relations as follows:
contract: A legally binding agreement consisting of reciprocal promises between two or more parties.
employment contract: A contract between an employer and an individual employee that defines the conditions under which
the employee will provide labour to the employer in exchange for a monetary benefit (wages, salary), and sometimes other
benefits (e.g., health benefits). An employment contract may be written or oral.
common law: A system of judge-made rules originating in England around the 12th century, and inherited by Canada as
a British colony, that uses a precedent-based approach to case law. Earlier decisions dealing with similar facts or legal issues
guide later decisions in an attempt to create legal predictability. However, common law rules can and often do evolve as social
values change.
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6 Part I The Law of Work: Themes, Frameworks, and Perspectives
The principle of freedom of contract removes the possibility of workers being treated exactly like
commodities, because by giving them the power to choose, the principle ensures the elementary
respect for the dignity, autonomy, and equality of citizens. So too the principle ensures a measure of
justice and fairness by permitting everyone to seek work without discrimination and obstructions
to competition. Furthermore, freedom of contract permits the parties to regulate their own relationship in order to deal with the special difficulties presented by the unique combination of characteristics of the employment relationship. The parties are likely to have the best information about where
their interests lie, and therefore they should be permitted to forge a compromise between their
competing interests without interference by a paternalistic state.6
Occasionally, disputes arise between employers and employees in which one of the parties
accuses the other of violating the employment contract. Those disputes may end up in a courtroom
in front of a judge if one party sues the other party for breach of contract. If the lawsuit does not
settle (most do), a judge will conduct a trial. At the trial, the parties will present a story to the judge
in the form of documentary evidence and witness testimonies, recounting versions of what happened leading up to the disagreement. The judge must then decide whether the contract was
breached and, if so, what the guilty party should be ordered to do as a remedy for the breach.
BOX 1.2 » TALKING WORK LAW
The Law of Work and Higher Education
Work law is taught to thousands of students each year in
dozens of Canadian universities and colleges, including in
law schools but also in programs in business and commerce,
human resource management, legal studies, labour studies,
industrial relations, and paralegal training. The number of
students learning work law in programs outside of law
schools far outnumbers those in law schools. This is not
surprising with so many professions that require knowledge
of work laws. Only lawyers who have
attended law school and passed the
required bar exams can practise work
law as a profession. In Canada, there are
17 law schools that offer a Juris Doctor
(JD) or Bachelor of Laws (LLB) in the
common law model, four that offer degrees only in the civil law model used
in Quebec, and two (University of Ottawa and McGill University) that offer
programs in both legal systems.
Each law school has its own law library. The largest law library in Canada
is housed at Osgoode Hall Law School at
York University in Toronto, with over
800,000 volumes. Each province’s professional legal body, or “law society,” also
has a law library. In the past, lawyers
needed to visit a law library to conduct research on old cases.
Nowadays, much if not all of that legal research can be conducted electronically through the use of both free (CanLII) and
fee-based services (Lexis Advance Quicklaw).
The exercise at the end of this chapter gives you the opportunity to practise finding common law case law using
CanLII (<https://www.canlii.org>), which provides free online
access to Canadian case law and legislation databases.
The Great Library at Osgoode Hall Law School in Toronto.
breach of contract: Occurs when a party to a contract violates one or more terms of a legally binding contract.
remedy: The means by which a court or tribunal enforces its decision, such as by ordering the guilty party to pay monetary
damages or take such further action the court deems appropriate to compensate victims for loss or deter future wrongful conduct.
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Chapter 1 Canadian Law of Work in a Nutshell 7
The judge writes a decision that is distributed to the parties and then published in legal case
digests and, nowadays, electronic case databases. At that point, the decision becomes part of the
common law of employment contracts, a large body of legal decisions about employment contracts
dating back to the beginning of the employment model in 19th-century Britain. The common law
of employment contracts in Canada now comprises hundreds of thousands of decided cases.
Lawyers research case law in search of decisions and reasoning that support their arguments.
They also must be prepared to distinguish cases that do not support their argument—to explain
to the judge why a previous decision relied on by their opponent is different from the one they
are dealing with now. This process is necessary because the common law system operates on a
precedent-based system known as stare decisis, a Latin phrase meaning, loosely, “to stand by a
previous decision.” Guided by a desire for the law to be predictable, the principle of stare decisis
instructs judges to follow the reasoning and outcomes in earlier cases that dealt with similar
legal issues and facts.
If the earlier decision was decided by a higher level of court from the same jurisdiction (see
Figure 1.2 for the levels of Canadian courts), then the reasoning in that decision is a binding
precedent. This means that a lower court judge who later deals with a lawsuit involving the
same, or very similar, factual and legal circumstances must apply the same legal reasoning
applied by the higher court, even if they do not agree with it. Decisions that are not binding
precedents can still have “precedent” value. Since the common law system prefers predictability,
judges usually follow earlier decisions, even those that are not issued by a binding higher court,
unless they distinguish the facts or legal issues decided in the earlier decision or they rule that
the earlier decision was just plain wrong.
2. The Law of Torts
Torts are the second branch of the common law. A tort is a legal wrong defined by judges to
allow a person to recover damages for harm caused by the actions of another person when the
harm caused does not violate a contract or government statute.7 Many of the torts that are
applied in Canada were initially developed years ago by British judges. You have likely heard of
some of them, even if you did not know they were called torts: nuisance, trespass, deceit, negligence, conspiracy, defamation, and assault and battery. All of these torts have potential application to the relationships that structure work in our society. Other less well-known yet important
torts with application to work include intentional infliction of mental suffering and negligent
misrepresentation. Chapter 16 explores some of the most important applications of tort law to
the workplace in the common law regime.
distinguish: To explain how a prior legal decision dealt with facts or legal issues that are different from the facts or issues in
the current case.
precedent: An earlier decision by a judge that dealt with the same, or very similar, facts and legal issues as those before a
judge in the current case.
stare decisis: A Latin term meaning “to stand by a previous decision.” It is a guiding principle in the common law regime.
jurisdiction: The scope of authority over which a government, court, or expert administrative power has the power to govern.
binding precedent (or binding decision): An earlier decision by a court of higher ranking dealing with the same legal
issue in a case that comes before a lower court judge. The lower court judge is required to apply the same reasoning and legal
test applied by the higher court.
tort: A type of wrongful act done by one person to another (or to another’s property) that judges have recognized as legally
actionable. Examples are nuisance, trespass, negligence, and conspiracy.
statute: A law, or legislation, produced by a government that includes rules that regulate the conduct of business and people.
An example is the Ontario Employment Standards Act, 2000.
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8 Part I The Law of Work: Themes, Frameworks, and Perspectives
FIGURE 1.2
Levels of Canadian Courts
Supreme Court of Canada (SCC)
Sits in Ottawa. Hears final appeals from all jurisdictions in Canada.
Court must first grant “leave” (permission) to hear an appeal.
Courts of Appeal
Each province and territory (except Nunavut) has its own Court of Appeal. There is also a
Federal Court of Appeal that hears appeals from lower-level federal courts and tribunals.
Courts of First Instance (Lower Courts)
These courts have different names across the country, and, other than in Nunavut, where there is a unified Court of Superior Justice, the courts of first instance are usually further subdivided into inferior and
superior courts, which have jurisdiction over different subject matter. Judges in the inferior courts are
appointed by the provinces, whereas superior court judges are appointed by the federal government.
Superior courts have general authority to hear most private lawsuits and serious criminal matters, while
inferior courts are usually assigned less serious criminal matters, traffic violations, and some specialized
subject matters, such as many family law matters. Most (though not all) employment-related matters
are heard initially in the superior courts of the jurisdiction in which the legal proceeding is launched.
Here is a quick overview of provincial and territorial courts of first instance:
JURISDICTION
INFERIOR COURT
SUPERIOR COURT
Alberta
Provincial Court
Queen’s Bench
British Columbia
Provincial Court
Supreme Court
Manitoba
Provincial Court
Queen’s Bench
New Brunswick
Provincial Court
Queen’s Bench
Newfoundland & Labrador
Provincial Court
Supreme Court
Northwest Territories
Territorial Court
Supreme Court
Nova Scotia
Provincial Court
Supreme Court
Ontario
Ontario Court of Justice
Superior Court of Justice
Prince Edward Island
Provincial Court
Supreme Court
Quebec
Court of Quebec
Superior Court
Saskatchewan
Provincial Court
Queen’s Bench
Yukon
Territorial Court
Supreme Court
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Chapter 1 Canadian Law of Work in a Nutshell 9
The usual remedy for a tort violation is monetary damages, but judges can also order injunctions
to remedy a tort. An injunction is an order to stop doing something unlawful. As we will learn in
Part IV, torts and the courts’ use of injunctions have played an important role throughout history in
restricting collective activities of workers, such as strikes and picketing, aimed at winning better
working conditions.8
B. The Regulatory Regime (Part III of This Text)
As noted above, the common law regime is guided by the powerful claim that “freedom of contract” advances individual liberty while producing the most efficient and desirable distribution
of skills and resources in a society. On this basis, defenders of freedom of contract argue that the
courts and governments should limit their intervention in employment relations to enforcing
contracts between employers and individual workers.9 However, this position has long been the
subject of intense debate and dissent.
Most of the time, employers enjoy far superior bargaining power as compared with employees and are therefore able to unilaterally fix the terms of the contract. This “inequality of bargaining power” leaves most employees with a simple choice of whether to accept or not accept
the terms the employer offers. No negotiation takes place at all. Think about your job, if you have
one. Did you engage in negotiations with your employer at the time you were hired, or did you
just accept whatever wage rate and other conditions your employer provided? Employees of
Walmart or Tim Hortons do not normally negotiate over starting wages or health benefits. Typically, the employers present a standard form employment contract (if they even bother to put
anything in writing), and the worker signs it.
Sometimes a person has multiple job possibilities, so they may be able to reject a poor offer by
one or more employers. However, often, and particularly in periods of high unemployment and for
jobs requiring low skills, far more workers are seeking work than there are jobs available. Since most
workers require income from work to survive, the option of not accepting a job is often not a realistic one. In most cases, workers need a job far more than an employer needs any particular worker.
The fact that the more powerful party—employers—can almost always fix the terms of the
employment contract unilaterally is not a new insight. Adam Smith (1723 –1790) knew it, as did
Karl Marx (1818–1883), two great thinkers with very different perspectives on the role of markets,
law, and work.10 German sociologist Max Weber (1864 –1920) summarized the point as follows:
The formal right of a worker to enter into any contract whatsoever with any employer whatsoever
does not in practice represent for the employment seeker even the slightest freedom in the determination of his own conditions of work, and it does not guarantee him any influence in the process. It
rather means, primarily, that the more powerful party in the market, i.e., normally the employer, has
the possibility to set the terms, to offer a job “take it or leave it,” and given the normally more pressing
economic need of the worker, to impose his terms upon him.11
The Supreme Court of Canada has recognized that employment contracts are distinguishable
from typical commercial contracts by the inherent inequality of bargaining power involved. For
example, in the 1992 case of Machtinger v. HOJ Industries, the court agreed with the following
observations by Professor Katherine Swinton:
[T]he terms of the employment contract rarely result from an exercise of free bargaining power in
the way that the paradigm commercial exchange between two 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.12
injunction: A legal order issued by a judge prohibiting a person from engaging in a particular course of action, such as breaching a contract, committing a tort, or violating a statute.
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10 Part I The Law of Work: Themes, Frameworks, and Perspectives
The claim that employees usually are the weaker party in the employment contract is not very
controversial. However, whether this inequality of bargaining power is problematic and creates
a need for legislative intervention to protect employees is one of the great debates in work law
policy.13 We will explore it throughout this text. However, it was important to introduce the
debate at this early point in order to understand the origins of the second regime of work law,
the regulatory standards regime.
In practice, employers often have not exercised their superior power in a responsible manner deemed acceptable to society. In the early days of industrial capitalism in Canada, for example, before much employment protection legislation existed, working conditions were often
horrific, characterized by dangerous practices, long hours, low pay, and verbal and physical
abuse at the hands of employers. Consider the following description of working conditions in
some late 19th-century Canadian factories, as described by a commissioner in a government
inquiry:
Many children of tender age, some of them not more than nine years old, were employed in cotton,
glass, tobacco, and cigar factories. … Some of them worked from six o’clock in the morning till six
in the evening, with less than an hour for dinner, others worked from seven in the evening till six in
the morning. … The darkest pages in the testimony … are those recording the beating and imprisonment of children employed in factories. Your Commissioners earnestly hope that these barbarous
practices may be removed, and such treatment made a penal offence, so that Canadians may no
longer rest under the reproach that the lash and the dungeon are accompaniments of manufacturing
industry in the Dominion.14
The sorts of working conditions described in the preceding passage led governments across
Canada to intervene in freedom of contract by enacting legislation (statutes and regulations)
that regulates working conditions. In fact, there has never been a time in Canada when employment was purely a matter of free contracting; for as long as employment has existed, so too has
employment regulation.
Nowadays, employment is among the most regulated of all relationships in society. In Part
III, we will examine government legislation that regulates wages and working time, workplace
health and safety, human rights and discrimination, workers’ compensation, and other forms
of legislation that aim to protect employees. Legislation that has as its central purpose the protection of vulnerable employees from the superior bargaining power of employers is known as
protective standards regulation.15 There are other types of legislation relevant to the law of
work that do not specifically target vulnerable workers but nevertheless affect labour markets
and the employment relationship in important ways. For example, vulnerable employees are
not the focus of intellectual property (IP) legislation, but IP laws affect who owns the product
of a worker’s labour. Immigration laws determine who is entitled to work in Canada. Legislation governing bankruptcies, privacy, pensions, and global trade is not directly or solely directed at the employment relationship, but these laws have important effects on that relationship.
Thus, the law of work includes both protective standards regulation and the broader system of
legal rules that have important effects on labour markets. We consider both types of legislation
in Part III.
regulations: Government-made detailed rules introduced as a supplement to, and pursuant to authority created in, a statute.
For example, the Ontario Employment Standards Act, 2000 requires that employers pay at least “the prescribed minimum wage,”
but does not say what that wage rate is. That act gives the government the right to introduce regulations (in s. 141), and one
regulation (O. Reg. 285/01) sets out the precise amount of the minimum wage.
protective standards regulation: Government regulation designed primarily to protect employees by imposing mandatory
standards, such as minimum contract requirements and safety rules.
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Chapter 1 Canadian Law of Work in a Nutshell 11
Regulation is usually enforced by a combination of government inspections and complaints
filed by people who believe their statutory rights have been violated. The task of hearing those
complaints falls to expert administrative tribunals. Tribunals are created by statutes and are not
the same as courts, although they sometimes function in a similar manner. Governments staff
tribunals with experts in the field, who help employers and employees resolve disputes through
mediation. When settlements cannot be obtained, tribunals hold hearings and issue legally binding decisions. By assigning authority over employment statutes to expert administrative tribunals, governments also limit the volume of employment-related disputes going to the courts.
For example, one of the busiest administrative tribunals in Canada is the Ontario Labour
Relations Board, which has authority to interpret several employment-related statutes, including the provincial Labour Relations Act and Employment Standards Act. The adjudicators are
known as chairs or vice-chairs, and almost all are former practising lawyers in the field. The
adjudicators conduct hearings and issue decisions resolving disputes arising under those statutes. Similar tribunals exist in every jurisdiction in Canada. The courts play a smaller role in the
regulatory standards regime than in the common law regime. The role of the courts is limited
mostly to reviewing tribunal decisions to ensure that the tribunal does not exceed the authority
granted it under its constituting statute, a process known as judicial review.
C. The Collective Bargaining Regime (Part IV of This Text)
The third regime of work law, the collective bargaining regime, is also primarily a response to
the imbalance of power in the employment relationship. However, rather than impose mandatory rules (“pay at least the minimum wage,” “do not work more than 48 hours in a week,” “do
not pay women less than men for the same work”) like the regulatory standards regime, the
collective bargaining regime addresses the inequality of bargaining power by conferring more
power on workers so that they can bargain a better deal for themselves. Whereas a single worker
acting alone usually lacks sufficient power to bargain with their employer over working conditions, a group of workers acting in combination often does have sufficient power to bargain. If
those workers, acting as a collective, can withhold their labour (strike) as bargaining leverage,
then their bargaining power grows substantially.
The collective bargaining regime is concerned with the processes through which workers act
collectively in pursuit of higher wages and better benefits and working conditions. Otto KahnFreund (1900 – 1979), who was professor of law at Oxford University, provided a now often-cited
justification for labour (collective bargaining) laws:
In its inception [the employment relationship] is an act of submission, in its operation it is a condition of subordination, however much the submission and the subordination may be concealed by
the indispensable figment of the legal mind known as the “contract of employment.” The main object
of labour [collective bargaining] law has always been, and we venture to say will always be, to be a
countervailing force to counteract the inequality of bargaining power which is inherent and must be
inherent in the employment relationship.16
expert administrative tribunals: Decision-making bodies created by a government statute and given responsibility for
interpreting and enforcing one or more statutes and any regulations pursuant to that statute.
judicial review: The process through which a decision of an expert administrative tribunal is appealed to a court on the basis
that the tribunal exceeded its authority (or jurisdiction) as defined in the statute that created it or that the tribunal’s decision
was wrong. How much deference a court must give to the expert tribunal’s decision is a complex question that is considered in
a field of law known as administrative law.
strike: Legislation can assign a particular definition to the word strike. In Canada, strikes are usually defined to include both
(1) a collective refusal by employees to perform work, and (2) a deliberate collective slowdown by workers designed to restrict
the output of an employer (commonly known as a work to rule).
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12 Part I The Law of Work: Themes, Frameworks, and Perspectives
This idea that collective bargaining produces a “countervailing force” that permits employees
to deal with the employer on a more equal footing is central to the collective bargaining regime.
Whether law should encourage or prohibit collective worker action is one of the great enduring
debates in labour law and policy. We will explore these issues in detail in Part IV.
The collective bargaining regime comprises three categories of legal rules:
1. Government-made statutory rules found in labour relations statutes regulating the
formation and administration of unions, collective bargaining, and industrial conflict,
enforced by expert administrative tribunals called labour relations boards.
2. Collectively bargained rules found in collective agreements. Employers and unions
usually negotiate these, although in some cases collective agreements are imposed in
whole or in part by interest arbitrators. Collective agreement rules are enforced by
either labour boards or expert labour arbitrators.
3. Judge-made rules based in common law torts that mostly apply to labour picketing and
strikes, which are issued and enforced by the courts.
All three categories of rules function together to create a complex, multi-layered legal model
that seeks to balance the sometimes overlapping but often competing interests of workers and
employers and their associations, suppliers, consumers, the broader society, and the economy
in general. Canadian government support for collective bargaining has ebbed and flowed dramatically over the past century, from outright hostility prior to the 1940s to cautious support in
the decades following the Second World War to resistance again, at least by conservative political parties, since the 1980s.17 We will discuss these trends in greater detail in Part IV, including
ways in which law and labour policy is used by governments to promote or discourage the
spread of collective bargaining.
Once workers are covered by a collective agreement, the legal rules of contract interpretation
applied by judges to individual employment contracts in the common law regime, introduced
above and explored in Part II of the text, no longer apply. The collective bargaining regime
replaces the common law of the employment contract for unionized workers. Canadian labour
law statutes require that all disputes between unions and employers about the interpretation and
application of collective agreements be resolved by labour arbitrators rather than judges. Since
the 1940s, labour arbitrators have developed a large body of labour arbitration case law, and
many of the rules of interpretation that are applied to collective agreements are different from
those applied to individual employment contracts by judges in the common law regime, as we
will learn in Part IV of this text.18
III. Chapter Summary
This chapter introduced the three regimes of work law that regulate the employment relationship in Canada at a general level, as if we were looking down at a topographical map of the law.
We can summarize what we learned as follows:
collective agreement: A contract between an employer (or employers) and a trade union (or trade unions) that sets out the
conditions of employment for a group of employees.
interest arbitrator: An individual or three-person expert arbitration board tasked with writing the terms of a collective agreement when the union and employer are unable to reach agreement through voluntary collective bargaining.
labour arbitrator: An individual or three-person expert arbitration panel appointed to decide disputes over the application
and interpretation of collective agreements.
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Chapter 1 Canadian Law of Work in a Nutshell 13
• The common law regime is concerned with legal rules found in employment contracts
between individual employees and employers, including rules judges have developed
over the years when interpreting those contracts, and with another branch of judge-made
legal rules known as torts. We learn more about this regime in Part II.
• The regulatory regime is concerned with rules governing the work relationship—and
employment contracts in particular—created by governments and codified in legislation
(statutes and regulations). The regulatory regime includes both legislation designed to
protect vulnerable employees and legislation that affects labour markets in substantial
ways. Those rules are interpreted by expert administrative tribunals created by governments for that purpose. We learn more about this regime in Part III.
• The collective bargaining regime is concerned with three categories of legal rules. The first
category comprises government-made statutory rules that regulate areas including union
formation, collective bargaining processes, and industrial conflict. The second comprises
collective bargaining rules found in collective agreements, which are negotiated by
unions (on behalf of employees) and employers (and sometimes employer associations).
Labour arbitrators decide collective agreement disputes, guided by a large volume of
labour arbitration jurisprudence developed since the 1940s. The third comprises judgemade rules based in common law torts that continue to apply within the collective bargaining regime, particularly in relation to picketing and strikes. We learn more about this
regime in Part IV.
QUESTIONS AND ISSUES FOR DISCUSSION
1. What two branches of law comprise the common law regime?
2. Briefly explain the three regimes of work law. Who (or what) is responsible for resolving
disputes that arise under each of the three regimes?
3. What are three levels of courts in Canada?
4. Explain the concept of stare decisis.
5. What are some strengths and weaknesses of “freedom of contract” in the context of work
law?
6. What three categories of legal rules compose the collective bargaining regime?
EXERCISE
Throughout this text, we will examine a lot of case law decided by courts and expert administrative tribunals. In the past, accessing case law was difficult and mostly the domain of lawyers.
It required visiting a law library and conducting complicated legal research using dense legal
reporting books and complex legal research skills honed in law school and years of legal
practice.
Today, lawyers and non-lawyers alike can access legal decisions on their computers. While
the most thorough legal databases require payment of expensive fees, increasingly legal decisions are being posted on free Internet databases. The Canadian Legal Information Institute
(CanLII) is a prime example. It is produced by the various Canadian law societies with the goal
of making “Canadian law accessible for free on the Internet.”
This text includes a number of exercises that encourage readers to conduct their own legal
research using CanLII. To give you a sense of how CanLII works, try the following exercise.
1. Go to the CanLII home page: <https://www.canlii.org>.
2. In the search window, type the phrase “wrongful dismissal” in quotation marks. That
search should give you over 7,000 legal decisions.
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14 Part I The Law of Work: Themes, Frameworks, and Perspectives
3. Find one decision that sounds interesting to you from the brief description that appears in
the search results. Select the link to the decision. Answer the following questions:
a. What is the name of the case?
b. What year was the case decided?
c. In what province did the case originate?
d. Was the case decided by a court or an expert administrative tribunal?
e. If it was a court, which court? If it was a tribunal, which tribunal?
f. Read the case. Can you determine what the dispute was about and which party won the
case?
If this is your first time reading a legal decision, it may be difficult for you to follow what is
happening. Do not fear, because that is normal. Reading the law takes a bit of practice because
the law uses specialized language. We will decipher this language throughout this text.
NOTES AND REFERENCES
1. G. Davidov, “The Reports of My Death Are Greatly Exaggerated: Employee as a Viable (Though Overly-Used)
Legal Concept,” in G. Davidov and B. Langille, eds,
Boundaries and Frontiers of Labour Law (Oxford: Hart,
2006) 133 at 133-34; B. Langille, “Labour Law’s Back
Pages,” in Davidov and Langille, ibid., at 13; and J. Fudge,
E. Tucker & L. Vosko, “Changing Boundaries in Employment: Developing a New Platform for Labour Law” (2003)
10 CLELJ 329; and H. Collins, “Independent Contractors
and the Challenge of Vertical Disintegration to Employment Protection Laws” (1990) 10 Oxford J Legal Stud 353.
2. C. Mummé, The Indispensable Figment of the Legal Mind:
The Contract of Employment at Common Law in Ontario,
1890 – 1979 (PhD dissertation, Osgoode Hall Law School,
2013) at 83.
3. P. Craven, “The Law of Master and Servant in Mid-Nineteenth Century Ontario” in D. Flaherty, ed, Essays in the
History of Canadian Law, vol. 1 (Toronto: University of
Toronto Press, 1981) 175-211.
4. See, e.g., An Act to Regulate the Duties Between Master
and Servant, and for Other Purposes Therein Mentioned,
S. Prov. Can. 1847, c. 23, S. Prov. Can 1851, c. 11; and
Ontario Master and Servant Act of 1855, 18 Vict., c. 136.
5. Sir Henry Maine famously wrote that “the movement of
the progressive societies has hitherto been a movement
from Status to Contract,” and the transition from master
and servant law to the employment contract model is often
considered an important part of that story. H.S. Maine,
Ancient Law: Its Connection with the Early History of
Society, and Its Relation to Modern Ideas (London: J.
Murray, 1861) at 170. However, as we discuss in Chapter 5,
employment contracts have always been heavily regulated
and subject to special rules of interpretation developed by
common law judges. See Mummé, supra note 2.
6. H. Collins, Employment Law, 2nd ed (Oxford: Oxford
University Press, 2009) at 14-15. Leading works
advocating the freedom of contract school of employment
law and the common law model that supports it include R.
Posner, Economic Analysis of Law, 5th ed (New York:
Aspen Law and Business, 1998) at chapter 8; M. Friedman, Capitalism and Freedom (Chicago: University of
Chicago Press, 1962); R. Epstein, “In Defense of Contract
at Will” (1984) 51 U Chicago L Rev 947; and R. Epstein,
Simple Rules for a Complex World (Cambridge, MA:
Harvard University Press, 1995) at chapters 8 and 9.
7. On Canadian tort law, see E. Weinrib, Tort Law: Cases and
Materials, 4th ed (Toronto: Emond Montgomery, 2014);
and A.M. Linden, Canadian Tort Law, 6th ed (Toronto:
Butterworths, 1997).
8. See the discussion in H. Carty, An Analysis of the Economic Torts (Oxford: Oxford University Press, 2001).
9. See, e.g., Posner, supra note 6, at chapter 11.
10. A. Smith, An Inquiry into the Nature and Causes of the
Wealth of Nations, vol. 1 (London: 1776) at 81: “it is not …
difficult to foresee which of the two parties must, upon all
ordinary occasions, have the advantage in the dispute, and
force the other into compliance with their terms. … In all
such disputes the masters [employers] can hold out much
longer.” K. Marx & F. Engels, The Communist Manifesto
(London: 1848) at 347: “In proportion as the bourgeoisie,
i.e., capital, is developed, in the same proportion is the
proletariat, the modern working class, developed—a class
of laborers, who live only so long as they find work, and
who find work only so long as their labor increases capital.
These laborers, who must sell themselves piecemeal, are a
commodity, like every other article of commerce, and are
consequently exposed to all the vicissitudes of competition, to all the fluctuations of the market. Owing to the
extensive use of machinery, and to the division of labor,
the work of the proletarians has lost all individual character, and, consequently, all charm for the workman. He
becomes an appendage of the machine, and it is only the
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Chapter 1 Canadian Law of Work in a Nutshell 15
most simple, most monotonous, and most easily acquired
knack, that is required of him. Hence, the cost of production of a workman is restricted, almost entirely, to the
means of subsistence that he requires for maintenance,
and for the propagation of his race.” See also K. Marx,
Capital (Hamburg: 1867). For a review of Marx and the
application of his work to industrial relations and the law
of work, see J. Goddard, Industrial Relations, the Economy,
and Society, 4th ed (Toronto: Captus Press, 2011) at
chapter 2. See also M. Skousen, The Big Three in Economics: Adam Smith, Karl Marx, and John Maynard
Keynes (Armonk, NY: M.E. Sharp, 2007).
11. M. Weber, “Freedom and Coercion” in M. Rheinstein, ed,
Max Weber on Law in Economy and Society (Cambridge,
MA: Harvard University Press, 1954) at 188.
12. Machtinger v. HOJ Industries, [1992] 1 SCR 986 at 1003.
13. A vast amount of legal literature exists on this debate,
dating from the beginning of waged labour. A good
summary of some of the leading historical voices in this
debate is found in Labour Law Casebook Group, Labour
and Employment Law: Cases, Materials, and Commentary,
8th ed (Toronto: Irwin, 2011) at chapter 1. In particular,
see the famous exchange between M. Friedman, Capitalism and Freedom (Chicago: University of Chicago Press,
1962) at 12-15, and C.B. MacPherson, “Elegant Tombstones: A Note on Friedman’s Freedom,” in Democratic
Theory: Essays in Retrieval (Oxford: Oxford University
Press, 1973) 143-56 at 143. Some recent contributions
include B. Langille, “Labour Law’s Theory of Justice,” in G.
Davidov & B. Langille, eds, The Idea of Labour Law
(Oxford: Oxford University Press, 2011) 101-20 at 111;
H. Arthurs, “Labour Law After Labour,” in Davidov &
Langille, 13-29 at 13; and A. Davies, Perspectives on
Labour Law, 2nd ed (New York: Cambridge University
Press, 2009) at chapter 2.
14. J. Rinehart, The Tyranny of Work: Alienation and the
Labour Process, 2nd ed (Toronto: Harcourt Brace, 1987) at
40; and G. Kealey, Canada Investigates Industrialism
(Toronto: University of Toronto Press, 1973) at 14, 22.
15. S. Bernstein, K. Lippel, E. Tucker & L. Vosko, “Precarious
Employment and the Law’s Flaws: Identifying Regulatory
Failure and Securing Effective Protection for Workers” in
L. Vosko, ed, Precarious Employment: Understanding
Labour Market Insecurity in Canada (Montreal: McGillQueen’s University Press, 2006) at 203.
16. P. Davies & M. Freedland, Kahn-Freund’s Labour and the
Law, 3rd ed (London: Stevens, 1983) at 18. This passage
was quoted with approval by Chief Justice Dickson of the
Supreme Court of Canada in Slaight Communications Inc.
v. Davidson, [1989] 1 SCR 1038 at part IV.
17. L. Panitch & D. Schwartz, From Consent to Coercion: The
Assault on Trade Union Freedoms, 3rd ed (Toronto: Garamond Press, 2003); and J. Fudge & E. Tucker, Labour
Before the Law (Oxford: Oxford University Press, 2001).
18. A number of books describe labour arbitration law in
Canada, including D. Brown, D. Beatty & C. Deacon, Canadian Labour Arbitration, 4th ed (Aurora, ON: Canada
Law Book, 2006); M. Mitchnick & B. Etherington, Labour
Arbitration in Canada (Toronto: Lancaster House, 2006);
and R. Snyder, Collective Agreement Arbitration in
Canada, 5th ed (Markham, ON: LexisNexis, 2013).
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CHAPTER 2
A Framework for Analyzing
the Law of Work
LEARNING OBJECTIVES
CHAPTER OUTLINE
After reading this chapter, students will be able to:
I. Introduction 17
II. Law Is What Law Does 18
III. A Framework for Analysis of the Law of Work 20
A. The Work Law Subsystem 20
B. External Inputs and the External Feedback Loop 26
IV. Chapter Summary 29
Questions and Issues for Discussion 31
Exercise 31
Notes and References 31
• Describe the key components of the work law subsystem.
• Explain how the work law subsystem interacts with the broader society
in which it functions.
• Describe how the power, values, and goals of key actors influence the
legal rules governing employment.
• Identify the different legal rules, or outputs, of the three regimes of the
work law subsystem.
• Explain how the three regimes of the work law subsystem interact with
and influence one another in ways that can affect the legal rules
produced within each regime.
I. Introduction
In Chapter 1, our survey of the topographical map of work law introduced, at a high level of
generality, the three legal regimes that comprise the main subject matter of this text—the common law of employment, regulatory standards, and collective bargaining. Dividing the law into
these three distinct regimes is a useful way for law professors and lawyers to organize and teach
the laws that govern employment in Canada. The first two regimes (common law and regulatory
standards) have traditionally been taught in “employment law” seminars using “employment law”
texts.1 The collective bargaining regime, by contrast, has usually been hived off and taught as
separate courses in “labour law,” “labour arbitration law,” and “industrial relations” and described
in law texts with similar names.2 As mentioned in Chapter 1, this text uses the labels work law
and the law of work when discussing the entire system of legal rules in all three legal regimes.3
However, compartmentalizing the laws that govern employment into the three regimes,
while useful for organizing educational materials, oversimplifies the complexity of the legal
framework that governs the work relationship in Canada. This becomes evident when we zoom
in on our map of the law of work. A closer inspection shows a far more complicated terrain, one
that cannot be so neatly compartmentalized. Continuing on with our geographical analogy, we
see that rivers flow across boundaries; inhabitants move from one part of the map to another,
only to return later; some inhabitants function in all three regimes simultaneously. The real
world of work law is a far more complex place than our discussion so far has suggested.
We need a way to understand and organize this complexity. This chapter addresses this challenge by developing a conceptual framework for the analysis of the law of work. This framework
draws a more complete map of the laws that govern work, as well as the relationship of those
laws to the broader economic, legal, political, social, and environmental context in which they
evolve and function.
17
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18 Part I The Law of Work: Themes, Frameworks, and Perspectives
II. Law Is What Law Does
Let’s begin with a simple lesson about legal rules. The relationship between a seller and buyer of
labour is above all else a human relationship, and human behaviour is complex. People behave
as they do for all sorts of reasons, of which formal legal rules are but one. Often, in fact, legal
rules in employment contracts and government regulations conflict with other powerful economic, legal, political, social, and environmental forces present in society. When that occurs,
something has to give, and sometimes it is the legal rules that are cast aside.
This lesson is demonstrated in the news article excerpt presented in Box 2.1. The excerpt
describes the experience of recent immigrants working in Toronto’s Chinatown. Some were
charged a $400 fee to obtain a job that pays them only $25 per day for ten hours of work, seven
days a week. Others earn $4 per hour for a 70-hour workweek. As we learn in Part III, Ontario’s
government long ago introduced employment standards legislation that includes a minimum
wage law, rules capping maximum hours of work, and rules requiring overtime pay at a higher
hourly rate for hours worked beyond 44 hours in a week (regulation regime).4 The employment
practices described in the story clearly violate these legal rules.
Systemic violations of labour rights such as those described in Box 2.1 raise complex questions: Why would employees agree to work under conditions that violate minimum legal standards? Why does the government bother passing employment standards laws if workers and
employers are prepared to agree to conditions falling below the legal minimums? Why do some
employers violate these laws? How do those employers get away with such violations? Why isn’t
the law working?
The excerpt in Box 2.1 reminds us of a fundamental point: we should never assume that
people comply with legal rules. What matters is how a legal rule actually affects behaviour (if it
does at all) and not simply what a legal rule says. To paraphrase film character Forrest Gump,
“Law is as law does.”5 Non-compliance with legal rules is a big problem in the law of work.
A 2017 report by Professors Vosko, Tucker, and Noack found that in complaints filed and
assessed under the Ontario Employment Standards Act between 2008 and 2015, violations were
found 69 percent of the time.6 Another study found that “about 25% of all federal employers
were not in compliance with most [employment standards] obligations … and that 75% of these
employers were not in compliance with at least one [employment standards] provision.”7 Professor Harry Arthurs noted in his 2006 study of Canadian federal labour standards that this latter
figure likely understated non-compliance because it is based on employer self-reporting.8
Ignorance of laws is no doubt partially to blame for this non-compliance. Work-related laws
can be complicated and difficult to understand. But ignorance of the law is only part of the story.
As noted earlier, sometimes a legal rule is sacrificed because it conflicts with more powerful
societal rules and norms. Other times a legal rule is knowingly violated because, considering all
relevant factors, including the odds of being caught and the penalties for non-compliance, it
makes more economic sense to someone to break the law than to comply with it. Economists
refer to this type of infraction as an efficient breach.9 Efficient breaches are a common problem
with employment regulation because governments lack the resources, capacity, and often the
political will to inspect all workplaces, and many employees will not complain for fear of losing
their jobs in reprisal. If a government decides to aggressively enforce its legal rules, some
employers might respond by fleeing the reach of the law altogether by moving their business
(and the jobs) to another jurisdiction. In that case, a law designed to help workers could actually
cause their unemployment.
efficient breach: A deliberate violation of a contract or government statute owing to the belief that it is more economically
efficient to violate the legal rule than to comply with it.
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Chapter 2 A Framework for Analyzing the Law of Work 19
BOX 2.1 » Recent Immigrant Workers in Toronto’s Chinatown and Labour Rights Violations
hours had exhausted her, and she quit her job. She had no
The bustling streets, sidewalks and shops of Toronto’s Chinaawareness of her rights as a worker until she was approached
town hide a troubling reality: many of the Asian immigrants
by the researchers conducting the survey; the legal clinic has
to Canada who work in the restaurants, salons, and other
subsequently assisted Ms. Zheng in her complaints against her
businesses are subjected to exploitation and dangerous and
former employer.
illegal working conditions. Various studies and investigative
Wei Sun was one of the eight volunteers who conducted
reports have uncovered a high proportion of workers who
the survey, which took place both on the street and via teleendure serious labour rights violations, regarding such issues
phone. She was quoted in the Toronto Star:
as the paying of minimum wage, hours worked per week,
overtime, holidays, and in many cases, unsafe equipment or
Many of the workers have worked in those kinds of
working conditions.
conditions for years and they just don’t care about
Several such issues were identified in a 2010 survey of
their rights. They just do whatever their bosses order
workers in various industries by the Chinese and Southeast
them to do and accept what they pay them. They
Asian Legal Clinic. The clinic issued a similar report in 2016,
never challenge. … It’s shocking in Canada that
focused primarily on the restaurant industry, entitled “Sweet
these people are working 70 hours a week, with an
and Sour: The Struggle of Chinese Restaurant Workers.” The
average hourly wage of $4.*
results of this survey illustrate how recent immigrants looking
for employment are commonly working overtime without
* N. Keung, “Few Aware of Labour Rights in Toronto’s Chinatown,” Toronto
compensation, and often unaware of the laws in Ontario reStar (23 July 2010), online: <http://www.thestar.com/news/
garding maximum hours of work per week. Notably, many
investigations/2010/07/23/few_aware_of_labour_rights_in_torontos_
people approached for the survey declined to take part, for
chinatown.html>
fear that doing so would put their jobs at risk.
Sources: Based off of “Chinese Restaurant Workers Underpaid and
Many Asian immigrants to Canada come from countries
Overworked, New Report Says,” CBC News (25 April 2016), online: <https://
with very few workers’ rights, and this lack of knowledge makes
www.cbc.ca/news/canada/toronto/chinese-restaurant-workers-report
-1.3551423>; Chinese and Southeast Asian Legal Clinic, <https://csalc.ca>;
them especially vulnerable to exploitation by business owners
Keung, ibid.
when they arrive in Toronto or other large immigrant centres
in Canada. Because many also lack strong English language
skills, they often remain unaware of their rights, or are not able
to access legal support.
The 2010 report included statistics
based on surveys of immigrant workers,
which indicated that fewer than one in five
respondents know what Ontario’s maximum hours of work laws are; two-thirds
are unaware of their rights to overtime and
holiday pay; and four out of ten are unaware of the current minimum wage in the
province. For the most part, they remain
simply unaware that they have legal protections, whether or not they actually have
a written employment contract.
The report’s subjects work largely in
service-sector jobs. Sue Zheng, who arrived from Fuzhou, China in 2006, is one of
the workers profiled in the 2010 report.
She describes coming to Canada with no
English language skills and finding work in
a nail salon. The 40-year-old mother of two
Many Asian immigrants to Canada come from countries with
was desperate for work in order to feed her
few workers’ rights, and they are vulnerable to exploitation by employers.
children, but after two months the long
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20 Part I The Law of Work: Themes, Frameworks, and Perspectives
We are beginning to scratch the surface of the complexity we are dealing with when we study
the law of work. If we are to make sense of how legal rules come about and why some are effective and others are not, we need a richer framework that can map this complexity. One way
to do this is to treat work law as one of many components, or subsystems, present in any complex, multi-faceted society, and to then study how those subsystems interact to produce the rules
that govern work. The remainder of this chapter discusses such a framework.
III. A Framework for Analysis of the Law of Work
Treating work law as one of a variety of subsystems operating in society at any given time provides a more realistic depiction of how things actually work. It allows us to see how legal rules
relating to the labour relationship are influenced by a whole range of pressures emanating from
outside the formal confines of laws targeting the employment relationship. The framework discussed in this section helps us more fully assess the role of law in our society, explain legal rules,
and predict the impact of legal rules.10
The law of work framework is presented in Figure 2.1. It is descriptive and demonstrates the
breadth of our subject, drawing attention to the reality that the law of work is more than the sum
of its parts. Every legal rule we encounter in this text is a result of the interaction among a variety
of forces, including fierce debates, rich histories, reluctant compromises, and sometimes violent
and bloody clashes. The laws that govern work in any society emerge from this complex milieu.
Therefore, we need to understand that legal rules do not operate in a vacuum. They shape and
are shaped by the many broader social, economic, political, and environmental forces operating
in society generally at any given time.11
A. The Work Law Subsystem
As noted earlier in this chapter, the separation of laws governing employment into three distinct
regimes obscures the important interconnections among the three regimes.12 It presents an
incomplete picture of how the laws that govern employment actually function in the real world.
To obtain a fuller, more accurate view, we need to step back and view the laws that govern the
employment relationship as a distinct subsystem of the broader society in which it functions.
This subsystem is presented in the box in Figure 2.1 labelled “The Work Law Subsystem.” Since
the work law subsystem is the focus of our attention in this book, it is presented in much greater
detail and as central in the framework.
subsystem: In legal sociology, a self-contained system within the broader social system that possesses its own rules, norms, and
modes of communication. Examples include economic and market; legal; political; social, cultural, and religious; and ecological/
environmental subsystems.
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Chapter 2 A Framework for Analyzing the Law of Work 21
FIGURE 2.1 Law of Work Framework
THE WORK LAW SUBSYSTEM
The Common Law Regime (Part II of the text)
KEY
ACTORS
Employers
•
Individual
employees
INTERNAL INPUTS
Power
•
Values
•
Goals
KEY LEGAL
INSTITUTION
Judges/courts
RULE-MAKING
PROCESSES
Individual
negotiations
•
Civil litigation
OUTPUTS
Employment
contracts
•
Torts
•
Workplace norms
The Regulatory Regime (Part III of the text, Chapters 18-24)
KEY LEGAL INSTITUTIONS
Government inspectors
•
Administrative tribunals
•
Judges/courts
RULE-MAKING
PROCESS
Legislative process
OUTPUTS
Protective
regulatory
standards
legislation
The Collective Bargaining Regime (Part IV of the text)
KEY
ACTORS
INTERNAL
INPUTS
Power
•
Values
•
Goals
Government
Employers and
their associations
•
Employees and
their associations
EXTERNAL
INPUTS
ECONOMIC AND
MARKET SUBSYSTEM
Labour and other
market forces at local,
regional, and global
levels
RULE-MAKING
PROCESSES
Legislative process
Collective bargaining,
strikes, and lockouts
•
Arbitration
•
Civil litigation
BROADER LEGAL SUBSYSTEM
Legal rules governing tax, trade
competition, immigration,
business associations, welfare,
property, and constitutional law
(among other fields)
(Part III of the text,
Chapters 25-27, Part V, Chapter
39, and various online
supplemental chapters
exploring bankruptcy, pension,
and intellectual property laws)
KEY LEGAL
INSTITUTIONS
Labour tribunals
•
Labour arbitrators
•
Judges/courts
POLITICAL
SUBSYSTEM
Party politics,
political values,
and political
systems
OUTPUTS
Collective
bargaining
legislation
•
Collective
agreements
•
Torts/labour
injunctions
•
Workplace norms
SOCIAL, CULTURAL, AND
RELIGIOUS SUBSYSTEM
Social and cultural norms,
religion, family, language, social
group dynamics, and identity
politics (class, race, gender, etc.)
ECOLOGICAL/
ENVIRONMENTAL
SUBSYSTEM
Climate, access to
natural resources,
geography
* Legal rules produced by each of the three regimes of work law feed back into the subsystem as information and experience and can provoke changes and adaptations by the actors in all
three regimes, which can produce new outputs.
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EXTERNAL FEEDBACK LOOP
INTERNAL INPUTS
Power
•
Values
•
Goals
INTERNAL FEEDBACK LOOP*
KEY
ACTOR
Government
22 Part I The Law of Work: Themes, Frameworks, and Perspectives
1. The Three Regimes of the Work Law Subsystem
The work law subsystem is dominated by the three traditional regimes of work law already introduced. However, now we add some new layers of detail to produce a more complex and realistic
depiction of the legal system. For those new to the study of law, or work law in particular, some
of the concepts and terms used in the following description of the work law subsystem will be
new. Not to worry; as we proceed through this text, we will consider everything that follows in
greater detail and consider examples. The purpose of the discussion here is to introduce the
main components of the framework.
a. The Common Law Regime (Part II of This Text)
The key actors in the common law regime are employers and individual employees. They engage
in the rule-making process of negotiation, and their agreements produce the main output of the
regime—individual employment contracts of service. When disputes arise about those contracts, they are sometimes resolved through civil litigation, which is the second rule-making
process in this regime. Civil litigation can also produce legal rules in the form of torts, another
important output. The courts (and the judges who preside over them) are the key legal institution. Judges/courts produce legal rules when they issue the contract interpretation and tort
decisions that form the essence of the common law of employment.
An additional output produced by the common law regime is workplace norms. These are
unwritten rules that nevertheless can have a great influence on how people are expected to behave
in given situations.13 Workplace norms are created over time through common experience that
creates expectations. Since things have long been done in a particular way, people expect that
those things will continue to be done in those ways. How often can employees take washroom
breaks, and do they need to ask permission? Is playful banter and horseplay between workers
tolerated or treated as harassment? Does the employer create a climate in which complaints can
be raised, or are employees too fearful to speak up? Can workers talk about personal matters or
use email or social media during working hours? Who gets first choice in vacation time or overtime? And so on. These are examples of questions and issues that can arise at any workplace, and
yet the answers may not be written down in any document. However, workplace norms can
explain why people behave as they do, and ignoring them can create an incomplete picture of how
legal rules influence behaviour. As we learn in Part II (for example, in Chapter 9 at pages 135-36),
workplace norms are sometimes recognized by judges as “past practices,” which can create legally
enforceable contractual rights or influence the interpretation of contracts.
Another addition to our framework is internal inputs. How the key actors behave—their
bargaining strategy, their manner of communication, their propensity to resist or concede
points, to pursue conflict or to resist it, and to obey or violate legal rules—depends on their relative power, as well as their values and goals. Understanding the power dynamic is crucial to
understanding how law operates in practice. For example, the employers of recent immigrants
in Toronto’s Chinatown possess a substantial power advantage. The workers need the piddling
wages paid by the employers just to survive. Many of the workers do not qualify for any type of
public assistance. Some workers may not legally be able to work in Canada because they do not
have a work permit, so they have few other employment options. If they resist the employer, they
negotiation: Discussion between two or more people aimed at reaching an agreement.
civil litigation: The processes involved with lawsuits filed in court not involving criminal law statutes, such as legal actions
for breach of contract or torts.
workplace norms: Norms or expectations that arise in a workplace as a result of past practices or relationships that can
influence behaviour at work, even though they are not codified in contracts or statutes.
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Chapter 2 A Framework for Analyzing the Law of Work 23
could be deported. The employers know all of this, and this gives them great power to set working conditions.
Yet not all actors who possess the power to impose their will on others exercise it in an
exploitative manner. The decision by an employer to pay a wage rate that is far below subsistence
levels reflects a value choice. Some employers pay workers more than the market requires
because they are guided by a value system based on humane and decent treatment of workers,
or because they believe higher pay will result in a more productive worker. For example, some
companies have adopted a “living wage” policy that sets wage levels at a rate that considers the
cost of living in the location where the work is performed, even though they have the bargaining
power to insist on lower wages.14 Actors’ goals also shape their decisions. Henry Ford voluntarily
adopted eight-hour workdays and doubled his workers’ wages in 1914, not only as “an act of
social justice” (e.g., values), but also because he believed doing so was necessary “so that the
business would be on a lasting foundation.” Ford believed that “low wage business is always
insecure,” and that his business depended on workers having money to buy cars.15 If we just
assume that terms of employment contracts result from free negotiation shaped by market
forces, we would be unable to explain the terms of employment at Ford in the early 20th century.
We need to consider how power, values, and goals shape the strategies of the parties who set
working conditions.
b. The Regulatory Regime (Part III of This Text)
The regulatory regime, as noted in Figure 2.1, is the domain of the government. It is the actor
that decides upon the content of the standards and enacts them into law by means of the legislative process (rule-making process). Governments, in their law-making function, are also influenced by internal inputs in the form of power, values, and goals. A government’s perspective on
the appropriate role of the state in regulating labour markets often shapes its goals and values as
it sets its agenda for regulatory reform, as we discuss in Chapter 3. However, sometimes governments make decisions affecting work laws for more pragmatic political reasons. For example,
the federal Conservative government imposed a ban on the use of foreign temporary workers
in 2014 by restaurant employers only after the practice attracted considerable public backlash
(see Chapter 25).16 A government’s power is a function of the political climate at a given time
and place. The greater the level of support for the government’s policy agenda from key stakeholders, including but not limited to the electorate, the greater the capacity of the government
to implement that agenda. The output of this regime is regulatory standards legislation intended
to protect employees, examples of which are explored in Part III. The key legal institutions
responsible for implementing and enforcing that legislation include government inspectors,
expert administrative tribunals (e.g., employment standards and human rights tribunals), and
judges/courts (which are mostly responsible within the regulatory standards regime for overseeing the administrative tribunals).
c. The Collective Bargaining Regime (Part IV of This Text)
Finally, the collective bargaining regime involves two distinct streams or types of rule-making
processes that produce a range of legal rules (outputs):
1. the legislative process, through which governments enact collective bargaining legislation that regulates unionization, collective bargaining, industrial disputes, and collective agreement administration; and
2. the collective bargaining process, through which unions and employers develop rules
through a mix of collective bargaining, sometimes accompanied by industrial conflict,
collective agreement administration and labour arbitration, and occasionally civil litigation, involving mostly tort law.
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24 Part I The Law of Work: Themes, Frameworks, and Perspectives
The government is the key actor in the legislative process, whereas employees and employers,
along with their collective associations, are the key actors in the collective bargaining process.
Unions are the most common example of collective associations, but there are other non-union
forms of employee associations in Canada;17 employer associations also exist, particularly in
industries such as construction and professional sports. As in the case of the common law
regime, how the actors in the collective bargaining regime behave and what legal rules are produced through collective bargaining are influenced in large measure by the relative power of the
actors and their respective values and goals (internal inputs).18
The key legal institutions in the collective bargaining regime are expert labour tribunals
(mostly labour relations boards), arbitrators (both labour arbitrators and interest arbitrators),
and judges/courts, which are involved in policing some aspects of collective action, particularly
through the use of torts and labour injunctions to restrain strikes and picketing. Finally, the
outputs of the collective bargaining regime include (1) collective bargaining legislation; (2) collective agreements between unions and employers (and sometimes employer associations), as
interpreted by labour arbitrators; (3) court-ordered torts and labour injunctions that restrict
some forms of collective bargaining - related activities; and (4) the same types of workplace
norms we discussed in relation to the common law regime.
2. The Internal Feedback Loop
A key to understanding the framework presented in this chapter lies in paying attention to how
its various components interact in an ongoing dynamic process. Two types of feedback loops
appear in Figure 2.1: (1) an internal feedback loop and (2) an external feedback loop. The internal feedback loop appears in blue and shows how the outputs of each regime “feed back” into
the other regimes as information that can influence actors’ behaviour and rule-making processes, and eventually produce new outputs.
To demonstrate, consider an obvious example of regime interaction within the work law
subsystem. Regulatory standards, such as the minimum wage found in Canadian employment
standards legislation, regulate both individual employment contracts in the common law regime
as well as collective agreements in the collective bargaining regime. Neither type of contract can
include a wage clause that provides for less than the statutory minimum wage. Nor can either
type of contract include a term that discriminates contrary to human rights legislation, to give
another example. In these ways, the outputs from the regulatory standards regime directly influence the range of options available to the key actors and legal institutions in the other two
regimes. So we cannot fully understand the outputs of the other two regimes without acknowledging the effects of the regulatory standards regime.
Similarly, the legal rules produced by the common law regime affect outputs from the other
two regimes. For example, governments have occasionally mimicked rules developed in the
labour arbitrator: An individual or three-person expert arbitration panel appointed to decide disputes over the application
and interpretation of collective agreements.
interest arbitrator: An individual or three-person expert arbitration board tasked with writing the terms of a collective agreement when the union and employer are unable to reach agreement through voluntary collective bargaining.
tort: A type of wrongful act done by one person to another (or to another’s property) that judges have recognized as legally
actionable. Examples are nuisance, trespass, negligence, and conspiracy.
labour injunction: An order issued by a judge that prohibits or restricts a union and unionized workers from engaging in
some type of collective action, such as a strike or picketing.
feedback loop: An explanatory device that demonstrates how outcomes produced by a system (e.g., legal rules produced by a
legal system) can influence other systems (e.g., the economic system) and also “feed back” into the original system as information
in a process of perpetual learning, experience, and change.
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Chapter 2 A Framework for Analyzing the Law of Work 25
common law and incorporated them into regulatory standards. The statutory “notice of termination” requirements in Canadian employment standards legislation (discussed in Part III) are
an example; they are modelled after the long-standing common law implied contract term
requiring “reasonable notice” of termination. More fundamentally, the common law regime acts
as the default legal system. Almost every regulatory standard and every collective bargaining law
represents the government’s response to some perceived inadequacy in the common law model.
To fully understand what objective statutory laws are seeking to achieve, we need to understand
how the common law would deal with the matter in the absence of legislation.
Finally, legal rules produced by the collective bargaining regime in the form of collective
bargaining laws and collective agreement provisions influence outputs from the other regimes.
Canadian collective bargaining legislation imposes many restrictions on the freedom of employers and individual employees to contract that would otherwise prevail in the common law
regime. An obvious example is that in the common law, a strike by workers is a breach of contract and a tortious conspiracy, but collective bargaining legislation shields workers from those
actions by protecting a limited right to strike in some circumstances.19 Also, many modern-day
statutory standards mimic terms that unions and employers had originally included in collective
agreements. For example, the roots of present-day maximum hours legislation are firmly
embedded in the Nine-Hour Movement organized by Canadian unions of the early 1870s, as
well as hours of work provisions that appeared later in collective agreements.20 The three
regimes of work law “learn” from one another. See Box 2.2 for another example of how collective
bargaining outputs can influence what occurs in the common law regime.
BOX 2.2 » An Example of the Internal Feedback Loop: The Dofasco Way
Industrial relations scholars have shown that collective agreements, bargained within the collective bargaining regime, influence the terms of individual employment contracts in non-union
workplaces (within the common law regime). This is known as
the spillover effect of collective bargaining.*
Some non-union employers pay their employees more than
market forces alone would dictate and offer other benefits,
including “grievance procedures” that attempt to mirror what
unions bargain into their collective agreements, in order to
remove or reduce the incentive for their employees to join
unions. The spillover effect is an example of the operation of
the internal feedback loop: outputs from the collective bargaining regime become inputs in the common law regime, influencing the internal inputs of the actors there, and ultimately the
terms of employment contracts and workplace norms within
the common law regime. The following excerpt from a newspaper story provides a glimpse into this process.
Robert Perkins thought he had a deal. He gave Dofasco 32 years of his life in the grit and noise of the
Hamilton steel mill. In exchange he was to get a se-
cure retirement with a good pension and health
benefits.
It was all part of a contract called The Dofasco Way,
the package of welfare programs leavened with a
healthy dose of fear that kept the company unionfree for 75 years, creating what employees always felt
was a “family atmosphere” where management really
cared about them.
Today, after taking early retirement because of the
way his body was worn down in fulfilling his part of
that contract, Perkins and several hundred other
Hamilton Dofasco veterans fear the old way is dead
and the deal has been summarily changed.
“They gave us a package when he retired and now
they’ve decided across the board to take away those
benefits,” said Perkins’ wife, Bonnie Hamilton. “Something’s just not right here. If they get away with this,
what’s going to be next?”
Dating back to 1937, The Dofasco Way combined
welfare initiatives such as recreation programs, concerts, picnics and a massive Christmas party with one
Nine-Hour Movement: A social movement peaking in the early 1870s seeking a legislated maximum nine-hour workday.
spillover effect: The effects that collective agreement settlements bargained by unions and employers have on individual
employment contracts in non-union workplaces.
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26 Part I The Law of Work: Themes, Frameworks, and Perspectives
of Canada’s first profit-sharing plans. Called The Fund,
the plan gave industrial workers an undreamt of
promise of security in their old age. That promise,
however, was always coupled with a far from
subtle threat—join a union and it could all be taken
away.
That combination of threat and promise worked
for 75 years, but today, many veteran workers fear
The Dofasco Way is dying a “death of a thousand cuts,”
as the steel industry concentrates into a few firms
with a global reach. …
The Dofasco Way was rooted in the visceral hatred
company founders Clifton and Frank Sherman had
toward labour unions—an evil they sought to keep
out of their Hamilton plants by creating a sense of
mutual interest between workers and management.
“My father felt a union created unrest in a company,” Frank Sherman Jr. recalled in a 2008 Spectator
interview. “He felt if people working in his company
were doing as well as people in unions, why would
they need one?Ӡ
* R. Freeman and J. Medoff, What Do Unions Do? (New York: Basic Books,
1984); D. Neumark and M. Wachter, “Union Effects on Nonunion Wages:
Evidence from Panel Data on Industries and Cities” (1995) 49:1 Indus &
Lab Rel Rev 20; and L. Kahn, “Union Spillover Effects on Organized Labor
Markets” (1980) 15:1 J Hum Resources 87.
† S. Arnold, “The Dofasco Way,” Hamilton Spectator (2012), online: <http://
www.thespec.com/news-story/2129793-the-dofasco-way/>.
If we study work law in silos, as three distinct regimes that do not interact, we would miss the
relationships described in Box 2.2. If we look only at the collective bargaining regime, we will
not even notice the benefits Dofasco gave its employees as a union avoidance strategy and,
therefore, the true effects of collective bargaining will be underestimated. If we study only the
common law regime, we might wrongly conclude that Dofasco employees used superior negotiating skills to bargain high wages and a generous benefit and retirement package, or that their
high productivity justified these generous contractual entitlements. Only by recognizing that the
regimes are interconnected through a process of ongoing information feedback will we discover
the full story of how legal rules emerge and influence labour market outcomes.
B. External Inputs and the External Feedback Loop
So far, we have looked only at what goes on within the work law subsystem itself—at how the
laws that govern employment are created and how the three regimes of work law interact with
one another. Now it is time to cast our gaze outward to the broader social system within which
the work law subsystem functions. As noted earlier, the work law subsystem does not operate in
isolation from the rest of society. It is influenced by its external environment, and the legal rules
it produces can also influence that external environment. These interactions are demonstrated
in Figure 2.1 by the purple arrows that flow out of the work law subsystem to the external inputs,
and from the external inputs back into the work law subsystem. These arrows indicate the external feedback loop component of our framework.
1. External Inputs
We can group these external forces into five distinct subsystems that function within every
advanced society. We can call these external inputs because they affect the development of work
laws from outside the work law subsystem itself (they involve forces that are not directly “about”
work laws but nevertheless affect work laws).
• Economic and market subsystem. Work law regulates labour markets. Its objective, beyond
protecting workers and regulating conflict, is to influence key labour market indicators,
such as labour costs, employment levels, labour market skills and training, and labour
market adjustment and flexibility. Labour markets are, in turn, influenced by other
union avoidance: A management strategy designed to reduce the risks that employees will join unions.
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Chapter 2 A Framework for Analyzing the Law of Work 27
domestic and foreign markets, including money markets, trade markets, energy markets,
transportation markets, product and consumer markets, and securities markets. Changes
in these other markets can influence what happens within the work law subsystem.
For example, as competition for an employer’s goods intensifies, the price it can charge
for those goods may fall, producing a lower profit margin. This consumer market change
may cause the employer to demand wage concessions from employees and influence the
amount of wages and benefits the employer can afford to pay its employees. Some of the
employers in Toronto’s Chinatown, described in Box 2.1, above, are operating in a highly
competitive global industry in which profit margins are very low and competition comes
from low-wage countries such as Bangladesh, Honduras, and China. The market pressure
on these employers to keep labour costs low is intense. These market pressures produce
a strong incentive for the employers to cheat on compliance with Canadian employment
standards laws.
• Broader legal subsystem. The laws that govern work are part of a large, complex, and
interrelated legal system. The laws we are interested in are influenced by developments
in many other legal fields, including tax, trade, immigration, competition, business, securities, criminal, intellectual property, social security, privacy, property, constitutional,
tort, criminal, and contract law. We are interested in these broader legal fields insofar as
they have important effects on how labour markets function.21
Consider some examples. Immigration laws are not specifically concerned with protecting vulnerable employees, but they influence who can have a job in Canada, as well
as the conditions under which new immigrants work. Laws that govern privacy in
Canada affect the rights of employers and employees even though they have much
broader application. Criminal law has played an important role in controlling worker
resistance to employer power in Canada. Intellectual property laws regulate ownership
of the products of work. Constitutional law determines which levels of government have
jurisdiction to enact work laws and restricts the range and substance of laws governments
can pass. Free trade laws that reduce tariffs and quotas influence the competitiveness of
Canadian labour markets and investment decisions in ways that can affect relative bargaining power vis-à-vis employers and workers.22
The preceding examples illustrate how laws that do not specifically target the employment relationship nevertheless have a substantial impact on that relationship and on
labour market functioning more generally. We cannot fully understand the law’s role in
regulating labour markets without considering these laws in addition to those that are
specifically targeted at protecting vulnerable employees. Therefore, our exploration of
regulatory standards in Part III will include (in Chapters 25-27 and 39) consideration of
government legislation that affects the behaviour of labour market actors even though
protecting vulnerable employees is not its central purpose.
• Political subsystem. The law of work is a function of the broader political economy within
which it functions.23 The political belief system and the distribution of political power
during a particular time shape how a government behaves as a lawmaker and an employer. Proposed changes to work laws are often included in political campaigns as a way
to attract voters. Politicians who prefer little regulation of labour markets have vastly
different ideas about the role of the state than do politicians who favour greater labour
market regulation, and these debates often play out in work law reforms as political winds
shift.24 We will explore the dominant political perspectives that have often shaped debates
about work law in Chapter 3.
free trade: A term used to describe a trade law policy characterized by low or zero trade tariffs and low or zero quotas on the
amount of goods that flow between national borders.
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28 Part I The Law of Work: Themes, Frameworks, and Perspectives
• Social, cultural, and religious subsystem. Social,
cultural, and religious
values are powerful
determinants of human
actions, and they have
key implications for the
law of work.25 The rich
fields of “sociology of
work,” “industrial sociology,” and “law and society” study how legal rules
and the tendency for
them to be obeyed (or
Demonstrators in Montreal took part in a protest in 2013
disobeyed) reflect social
against Quebec’s proposed Values Charter.
norms and values.26 As
noted above, employers of the workers in Toronto’s Chinatown are able to ignore employment standards laws in part because the workers lack the language skills and social support mechanisms that would enable them to resist this form of exploitation. The
organizations mentioned in Box 2.1 that assist the new immigrants attempt to build up
these social networks as part of a broader strategy in pursuit of greater levels of legal
compliance. Consider, as another example, the Quebec government’s recent ban on the
wearing of religious symbols at work by public sector workers. This law is rooted in cultural and religious tensions within Quebec and cannot be understood without careful
consideration of those tensions.27
• Ecological/environmental subsystem. The types of labour market activities that are feasible
are influenced by simple geography (e.g., ocean communities have fisheries and ports,
mountain communities have skiing) and access to natural resources (think forestry and
mines). Climate can affect the strategies of work law actors in simple ways, such as when
a union attempts to coordinate a labour dispute and the accompanying picketing for the
balmy summer months rather than the frigid winter months. More fundamentally, climate change poses substantial challenges for labour markets, and work law may need to
adapt to respond in the years to come.28
These other subsystems are described as external inputs in our framework because, although
they are not directly related to legal rules that govern the labour relationship, they can each affect
the types of work laws governments enact; the perspectives and reasoning applied by tribunals,
arbitrators, and judges; and the behaviour, strategies, power, values, and goals of the actors
within the work law subsystem. And the influence can flow in both directions, as demonstrated
in Figure 2.1 by the external feedback loop represented by the purple feedback arrows flowing
out of the work law subsystem on the right side of the figure to the external inputs, and then
back into the work law subsystem.
2. The External Feedback Loop
We will consider how the external feedback loop influences the development of the law at various points in the text. However, to provide a quick example, consider the history of human
rights legislation in Canada, which will be explored in greater detail in Part III. In important
early cases within the common law regime, judges refused to recognize a tort of discrimination
with the result that, within that regime, it is lawful for employers to discriminate against job
applicants and employees.29 Not surprisingly, an outcome of the common law regime was
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Chapter 2 A Framework for Analyzing the Law of Work 29
employment discrimination. Women were paid less than men; people were refused employment
because of their religion; Chinese and non-white workers were treated worse than white workers; and so forth.
This output of the common law regime was noted within the broader Canadian society, and
it created controversy, social division, unrest, and exclusion. Over time, as social and cultural
values evolved, more Canadians came to recognize these blatantly discriminatory practices as
unjust. These sentiments eventually were reflected in political discourse, leading to the enactment of “human rights” legislation (within the regulatory standards regime). By the 1940s,
legislation had been introduced in Canada prohibiting discrimination in employment on the
basis of such grounds as race, creed, colour, nationality, ancestry, and place of origin. In
the 1950s, gender was added as a prohibited ground, followed by disability and family status in
the 1980s.
Sexual orientation was added to Quebec’s Charter of Human Rights and Freedoms as a prohibited ground of discrimination in 1977, but it was not until 1986 that the next province
(Ontario) added sexual orientation to its Human Rights Code. Other provinces followed, but
some held out, including Alberta and Prince Edward Island, which continued to permit discrimination in employment against gay and lesbian workers until 1998. In that year, the Supreme Court of Canada decided the case of Vriend v. Alberta, in which it ruled that Alberta’s
human rights legislation violated the Canadian Charter of Rights and Freedoms by not including
sexual orientation as a prohibited ground.30 This constitutional law decision effectively required
those provinces that had not already done so to add sexual orientation to the list of prohibited
grounds of discrimination in their human rights legislation.
This (very simplified) recounting of the history of human rights legislation demonstrates
the analytical contribution of the external feedback loop in our framework. For decades,
employment discrimination was lawful in Canada. However, changes within the social, cultural, and religious subsystem, in the form of growing intolerance of blatant labour market
discrimination, undermined the sustainability of this discriminatory legal model. Politicians
picked up on this movement (within the political subsystem) and began calling for government intervention in the labour market in the form of new regulatory standards banning some
forms of employment discrimination. However, not all forms of discrimination were considered equally abhorrent. It took much longer for social and political pressures to build for a
prohibition on sexual orientation discrimination to be introduced. Not until a major event
occurred within the broader legal subsystem did a prohibition on sexual orientation in Canada
become universal.
The external feedback loop is an analytical tool that draws our attention to the crucial fact
that laws are a function of the broader social system in which they exist, and that laws involve
an evolutionary process. They are not static. This text will regularly challenge the reader to step
back and consider the legal rules in this broader context. This way, we can better understand
how we got to the present point, and perhaps also better predict where we are headed.
IV. Chapter Summary
This chapter introduced a framework for analyzing the law of work. This framework represents
an important analytical tool and a conceptual model for organizing the content that will follow
in the remainder of the text. The key insight is that the laws that govern work are part of a complex system that comprises economic, legal, political, social, cultural, religious, and ecological/
environmental subsystems. We need to consider the law of work in this context in order to have
a comprehensive understanding of the forces that influence and shape it. This framework will
make more sense to you (hopefully!) as we progress through the text.
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Part I The Law of Work: Themes, Frameworks, and Perspectives
FIGURE 2.2
Law of Work Framework Worksheet
THE WORK LAW SUBSYSTEM
The Common Law Regime (Part II of the text)
KEY
ACTORS
Employers
•
Individual
employees
INTERNAL INPUTS
Power
•
Values
•
Goals
KEY LEGAL
INSTITUTION
Judges/courts
RULE-MAKING
PROCESSES
Individual
negotiations
•
Civil litigation
OUTPUTS
Employment
contracts
•
Torts
•
Workplace norms
The Regulatory Regime (Part III of the text, Chapters 18-24)
INTERNAL INPUTS
Power
•
Values
•
Goals
KEY LEGAL INSTITUTIONS
Government inspectors
•
Administrative tribunals
•
Judges/courts
RULE-MAKING
PROCESS
Legislative process
OUTPUTS
Protective
regulatory
standards
legislation
The Collective Bargaining Regime (Part IV of the text)
KEY
ACTORS
Government
Employers and
their associations
•
Employees and
their associations
EXTERNAL
INPUTS
ECONOMIC AND
MARKET SUBSYSTEM
INTERNAL
INPUTS
Power
•
Values
•
Goals
RULE-MAKING
PROCESSES
Legislative process
Collective bargaining,
strikes, and lockouts
•
Arbitration
•
Civil litigation
BROADER LEGAL SUBSYSTEM
KEY LEGAL
INSTITUTIONS
Labour tribunals
•
Labour arbitrators
•
Judges/courts
POLITICAL
SUBSYSTEM
OUTPUTS
Collective
bargaining
legislation
•
Collective
agreements
•
Torts/labour
injunctions
•
Workplace norms
SOCIAL, CULTURAL, AND
RELIGIOUS SUBSYSTEM
EXTERNAL FEEDBACK LOOP
KEY
ACTOR
Government
INTERNAL FEEDBACK LOOP*
30 ECOLOGICAL/
ENVIRONMENTAL
SUBSYSTEM
* Legal rules produced by each of the three regimes of work law feed back into the subsystem as information and experience and can provoke changes and adaptations by the actors in all
three regimes, which can produce new outputs.
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Chapter 2 A Framework for Analyzing the Law of Work 31
QUESTIONS AND ISSUES FOR DISCUSSION
1. What are internal inputs, and how do they influence the outputs of the common law and
collective bargaining regimes?
2. Give an example of how a legal rule produced by the regulatory standards regime affects
the outputs of the common law or collective bargaining regime through the operation of
an internal feedback loop.
3. Describe the two rule-making processes within the collective bargaining regime.
4. Explain the relevance of “efficient breach” in the context of work law.
5. The various subsystems identified as external inputs in the law of work framework presented in this chapter have all attracted considerable scholarly attention in their own right.
You may have taken other non-law courses that study work and employment. Link the
following academic disciplines to an appropriate external subsystem:
•
•
•
•
•
•
•
environmental justice,
political science/political economy,
law and society,
labour market economics,
sociology of work,
work and gender, and
labour history.
EXERCISE
Using the law of work framework worksheet in Figure 2.2, list factors in the “External Input”
boxes that you believe contributed to the poor working conditions experienced by the recent
immigrants to Toronto described in Box 2.1.
NOTES AND REFERENCES
1. See, e.g., G. England, Individual Employment Law, 2nd ed
(Toronto: Irwin, 2008).
2. See, e.g., G. Adams, Canadian Labour Law, 2nd ed
(Aurora, ON: Canada Law Book, 1993); and M. Mitchnick
& B. Etherington, Labour Arbitration in Canada (Toronto:
Lancaster House, 2006). The practice of separating the
three regimes into “employment law” and “labour law” was
not universally adopted in Canada. For example, Professors Harry Glasbeek, Eric Tucker, and Judy Fudge of
Osgoode Hall Law School long taught and organized their
teaching materials on the basis that the three regimes
needed to be understood as a coherent web of rules and
not as distinct subfields. See H. Glasbeek, J. Fudge & E.
Tucker, Labour Law (Toronto: Osgoode Hall Law School,
York University, 2007-8).
3. In Britain and much of Europe, the term labour law is used
to describe all three regimes that govern employment
(common law, regulatory standards law, and collective bargaining law): see, e.g., H. Collins, K. Ewing & A. McColgan, Labour Law: Text and Materials, 2nd ed (Oxford:
Hart, 2005). In Canada and the United States, texts that
combine all three regimes are more often entitled “labour
AND employment law”: see, e.g., Labour Law Casebook
Group, Labour and Employment Law: Cases, Materials,
and Commentary, 8th ed (Toronto: Irwin, 2011). This is
the first book in Canada to adopt the shorter monikers
“work law” and “law of work” to describe all three regimes,
but authors in other countries have done so: M. Crain, P.
Kim & M. Selmi, Work Law: Cases and Materials, 2nd ed
(New Providence, NJ: LexisNexis, 2010); and R. Owens, J.
Riley & J. Murray, The Law of Work, 2nd ed (South Melbourne: Oxford University Press, 2011).
4. Employment Standards Act, 2000, SO 2000, c. 41, Part VII
(“Hours of Work and Eating Periods”), Part VIII (“Overtime Pay”), and Part IX (“Minimum Wage”).
5. The character Forrest Gump in the movie Forrest Gump
(1994) said: “Stupid is as stupid does.” See D. Doorey,
“Harry and the Steelworker (or Teaching Labour Law to
Non-Law Students)” (2008) 14 CLELJ 107.
6. L. Vosko, A. Noack & E. Tucker, Employment Standards
Enforcement: A Scan of Employment Standards Complaints
and Workplace Inspections and Their Resolution Under the
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32 Part I The Law of Work: Themes, Frameworks, and Perspectives
Employment Standards Act, 2000 (March 2016) at 29,
online (pdf): <https://cirhr.library.utoronto.ca/sites​
/cirhr.library​.utoronto.ca/files/research-projects/Vosko%20
Noack​%20Tucker-%206A%20-ESA%20Enforcement.pdf>.
7. Federal Labour Standards Review, Fairness at Work:
Federal Labour Standards for the 21st Century (Ottawa:
Human Resources and Skills Development Canada, 2006)
at 192. The problem of high non-compliance with work
laws is not a distinctly Canadian problem. On the problem
of non-compliance in the United States, see D. Weil,
“Implementing Employment Regulation: Insights on the
Determinants of Regulatory Performance,” in B. Kaufman,
ed, Government Regulation of the Employment Relationship
(Madison, WI: Industrial Relations Research Association,
1997) at 429.
8. Federal Labour Standards Review, supra note 7 at 191-92.
9. R. Posner, Economic Analysis of Law, 5th ed (New York:
Aspen, 1998) at 131; and C. Goetz & R. Scott, “Liquidated
Damages, Penalties, and the Just Compensation Principle:
A Theory of Efficient Breach” (1977) 77 Colum L Rev 554.
10. The framework developed in this chapter draws on a long
and rich history of systems approaches to law and, in particular, work on industrial relations systems developed by
John Dunlop (Harvard University) and later adapted to the
Canadian setting by Alton Craig (University of Ottawa):
J. Dunlop, Industrial Relations Systems (New York: Henry
Holt, 1958); and A. Craig & N. Solomon, The System of
Industrial Relations in Canada, 5th ed (Scarborough, ON:
Prentice Hall, 1996). The influential 1969 Woods Task
Force on Labour Relations in Canada adopted the term
industrial relations systems, assigning it this meaning: “the
complex of market and institutional arrangements, private
and public, which society permits, encourages, or establishes to handle superior-subordinate relationships
growing out of employment and related activities.” See The
Report of the Task Force on Labour Relations (Ottawa:
Queen’s Printer, 1969) at 9. The industrial relations systems
model drew on insights from broader systems theory. See
especially T. Parsons & N. Smelser, Economy and Society: A
Study in the Integration of Economy and Social Theory
(London: Routledge, 1956); and N. Luhmann, The Differentiation of Society (New York: Columbia University Press,
1982). See also R. Nobles & D. Schiff, Observing Law
Through Systems Theory (Oxford: Hart, 2013).
11. H. Arthurs, Law and Learning: Report of the Consultative
Group on Research and Education in Law (Ottawa: Social
Sciences and Humanities Research Council of Canada,
1983) at 59. See also Doorey, supra note 5.
12. B. Langille, “Labour Law Is a Subset of Employment Law”
(1981) 31 UTLJ 200.
13. This is a key insight of legal pluralism, a strand of legal
theory that draws attention to the many sources of rules
and norms that shape behaviour beyond formal contract
and state-based law. In the work context, these ideas are
reflected in a rich literature on industrial pluralism. See,
e.g., H. Arthurs, “Understanding Labour Law: The Debate
over ‘Industrial Pluralism’” (1985) 38 Curr Legal Probs 83;
S. Henry, “Factory Law: The Changing Disciplinary Technology of Industrial Social Control” (1982) 10 Intl J Soc L
365; and Dunlop, supra note 10 at 7-18 for a discussion of
the “web of rules” that shape workplace behaviour.
14. A vast literature exists on “living wage” campaigns and policies. For a review, see D. Doorey, “Mapping the Ascendance of the ‘Living Wage’ Standard in Non-State Global
Labour Codes” (2015) 6 Transnat’l L Theory 435; and L.
Glickman, A Living Wage (Ithaca, NY: Cornell University
Press, 1997). A recent example involves the company
Hennes and Mauritz (H&M), the world’s second-largest
clothing retailer, vowing to implement a “living wage”
policy throughout its global supply chain. See “H&M Fails
to Pay Factory Workers Living Wages Advocate Groups
Allege,” Global News (24 September 2018), online: <https://
globalnews.ca/news/4480705/hm-factory-workers-wages>.
15. H. Ford, My Life and Work (Garden City, NY: Doubleday,
1922) at chapter VIII. The full quotation reads: “Many
employers thought we were just making the announcement because we were prosperous and wanted advertising
and they condemned us because we were upsetting
standards—violating the custom of paying a man the
smallest amount he would take. There is nothing to such
standards and customs. They have to be wiped out. Some
day they will be. Otherwise, we cannot abolish poverty. We
made the change not merely because we wanted to pay
higher wages and thought we could pay them. We wanted
to pay these wages so that the business would be on a
lasting foundation. We were not distributing anything—we
were building for the future. A low wage business is always
insecure.”
16. See L. Goodman, “Jason Kenney Suspends Restaurants
from Scandal-Plagued Temporary Foreign Worker
Program” National Post (24 April 2014), online: <http://
news.nationalpost.com/news/canada/canadian-politics​/
jason-kenney-suspends-restaurants-from-scandal
-plagued-temporary-foreign-worker-program>.
17. See, e.g., D. Taras & B. Kaufman, “Non-Union Employee
Representation in North America: Diversity, Controversy,
and Uncertain Future” (2006) 37 Indus Rel J 513.
18. See Craig & Solomon, supra note 10 at 8-10; and R.
Chaykowski, “Collective Bargaining: Structure, Process,
and Innovation,” in M. Gunderson, A. Ponal & D. Taras,
eds, Union-Management Relations in Canada, 5th ed
(Toronto: Pearson, 2005) at 257.
19. Another example involves so-called yellow dog contracts,
which are legal under the common law regime based on
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Chapter 2 A Framework for Analyzing the Law of Work 33
freedom of contract but are prohibited by Canadian labour
relations legislation. A yellow dog contract was a contract
term that required an employee to refrain from joining a
union as long as they were employed with a particular employer, and it permitted the employer to fire the employee
if the term was breached. Modern labour legislation prohibits contract terms that prohibit an employee from
joining a union.
20. See D. Morton, Working People, 5th ed (Montreal and
Kingston: McGill-Queen’s University Press, 2007) at 21-25.
21. The argument that “labour law” encompasses the bundle of
laws that have important effects on labour markets has
been made by H. Arthurs, “Charting the Boundaries of
Labour Law: Innis Christie and the Search for an Integrated
Law of Labour Market Regulation” (2011) 34 Dal LJ 1.
22. See the discussion in A. Jackson, Work and Labour in
Canada: Critical Issues, 2nd ed (Toronto: Canadian Scholars’ Press, 2009) at 248-53; R. Grinspun & R. Kreklewich,
“Consolidating Neoliberal Reforms: ‘Free Trade’ as a Conditioning Framework” (1994) 43 Stud Pol Econ 33; and K.
Banks, “Must Canada Change Its Labour and Employment
Laws to Compete with the United States?” (2013) 38
Queen’s LJ 419.
23. See Arthurs, supra note 21.
24. F. Martinello, “Mr. Harris, Mr. Rae, and Union Activity in
Ontario” (2000) 26 Can Pub Pol’y 17; D. Doorey, “A Model
of Responsive Workplace Law” (2012) 50 Osgoode Hall LJ
47; and L. Panitch & D. Schwartz, From Consent to Coercion: The Assault on Trade Union Freedoms, 3rd ed
(Aurora, ON: Garamond, 2003).
25. See, e.g., H. Krahn, G.S. Lowe & K.D. Hughes, Work,
Industry, and Canadian Society, 6th ed (Toronto: Thomson
Nelson, 2011).
26. See, e.g., the periodical Work, Employment, and Society
published by Sage Publications: <http://www.sagepub.com/​
journals/Journal201568/title>.
27. See R. Lau, “Quebec’s Proposed Religious Symbol Ban for
Public Workers Fueled by Specific Symbols: Study” Global
News (2018), online: <https://globalnews.ca/news/​4727065/​
quebec​-religious-symbol-ban-study>; and “Charter of
Quebec Values Would Ban Religious Symbols for Public
Workers,” CBC News (2013), online: <http://www.cbc.ca​
/news​/​canada/montreal/charter-of-quebec​-values-would​
-ban​-religious​-symbols​-for​-public​-workers-1.1699315>.
28. See C. Lipsig-Mummé, ed, Climate@Work (Halifax: Fernwood, 2013); and D. Doorey, “Just Transitions Law:
Putting Labour Law to Work on Climate Change” (2017)
30 J Envtl L & Prac 201.
29. Christie v. The York Corporation, [1940] SCR 139; and
Seneca College v. Bhadauria, [1981] 2 SCR 181.
30. Vriend v. Alberta, [1998] 1 SCR 493, 156 DLR (4th) 385.
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CHAPTER 3
Key Perspectives That Shape
the Law of Work
LEARNING OBJECTIVES
CHAPTER OUTLINE
After reading this chapter, students will be able to:
I. Introduction 35
II. The Main Perspectives That Shape the Law of Work 38
A. The Neoclassical Perspective 38
B. The Managerialist Perspective 41
C. The Industrial Pluralist Perspective 43
D. The Critical Reformist Perspective 46
E. The Radical Perspective 47
III. Chapter Summary 48
Questions and Issues for Discussion 48
Exercises 49
Notes and References 49
• Describe the five key perspectives that have dominated debates and
thinking about the role of law in governing work relationships in
Canada.
• Recognize how the dominant perspective in political and public
discourse can influence the form and content of work laws.
• Describe how the dominant perspectives have changed in Canada over
time.
I. Introduction
According to the Fortune 500 rankings of American corporations, the fiscal 2017 profits for
Wal-Mart Stores (Walmart) were just over US$13.5 billion, making it one of the most profitable
corporations in history.1 Walmart paid its CEO, Doug McMillon, $22.4 million in compensation
that year.2 At the same time, the median Walmart retail employee earned about $19,177 in 2017.
That means that McMillon earned 1,188 times what the median Walmart employee earned that
year.3 The law in both Canada and the United States requires Walmart to pay its employees at
least a minimum wage set by the government, even if Walmart would like to pay its employees
less and those employees were prepared to work for less. However, in neither country does the
law impose a mandatory ceiling on employee compensation.
Why do our governments impose legal floors on wages, but not legal ceilings? The answer is
that minimum wage laws protect “vulnerable workers” who might be taken advantage of by
employers owing to their lack of bargaining power. If there were no minimum wage, many
employers currently paying that rate would pay their employees less provided they were able
to attract workers who need jobs and are willing to work for less. The minimum wage represents a government’s rejection of market forces as a mechanism for setting wages for lowincome workers. The government is essentially saying, “We don’t trust labour market forces and
freedom of contract to produce an acceptable wage, given the standard of living we want for
our citizens.” Governments have not been concerned about maximum wages, because highincome workers have sufficient bargaining power to look after their own interests. Very
high income has not typically been considered a social and economic problem, whereas very
low income often has.
However, not everyone agrees that there should be a minimum wage, and some think there
should be a maximum wage.4 Whenever a Canadian government raises the minimum wage,
35
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36 Part I The Law of Work: Themes, Frameworks, and Perspectives
complaints arise from business groups that the move will “cost jobs,” countered by worker advocates who reject those claims or argue that the increase is too small. Both sides in this debate
point to studies they claim support their position. Others argue that minimum wage policy is
about decency and fairness, not economics. There is no “correct” answer to the question of
whether governments should regulate wages. There are only arguments for and against that
regulation based on different perspectives, which are explored in Box 3.1.
BOX 3.1 » TALKING WORK LAW
Is the Minimum Wage a Good Policy?
The answer to the question above depends on a person’s perspective. Whether a minimum wage should exist and the level
at which such a wage should be fixed are among the many
interesting debates that arise within the law of work. We will
explore these debates in greater detail in Part III. Attitudes and
opinions vary widely. Consider the range of opinions reflected
in the following quotations from recent Canadian debates over
proposed increases to minimum wage levels:
From the Fraser Institute, a conservative Canadian think
tank that advocates on behalf of corporate interests for limited
government regulation in labour markets:
Increasing British Columbia’s minimum wage to
$10.25 an hour could lead to a loss of more than
52,000 jobs. When governments impose high labour
costs on businesses, employers react by hiring fewer
workers and reducing the number of hours employees work.*
From the Wellesley Institute, a think tank that advocates for
better health in urban centres:
An increase in the minimum wage will raise the floor
for all Ontario employees. This increase will have a
positive impact on those working for minimum wage
and other low wage workers. It could also transfer
income from shareholders to employees. The com-
bined impact would reduce income inequality. In a
time when governments feel that their budgets are
constrained, this is a policy approach to address and
reduce income inequality that is crucial and
timely.†
From “Fairness at Work,” a government-commissioned study
of federal employment standards laws in Canada:
In the end, however, the argument over a national
minimum wage is not about politics and economics.
It is about decency. Just as we reject most forms of
child labour on ethical grounds, whatever their economic attractions, we recoil from the notion that in
an affluent society like ours good, hard-working
people should have to live in abject poverty.‡
* Fraser Institute, “BC’s $10.25 Minimum Wage Could Cost More Than
52,000 Jobs and Reduce Opportunities for Young Workers” (29 April
2011), online (news release): <http://www.fraserinstitute.org/research
-news/news/display.aspx?id=17461>.
† S. Block, “Who Is Working for Minimum Wage in Ontario?” (October
2013), executive summary, online (pdf): Wellesley Institute <http://www​.
well​esleyinstitute.com/wp-content/uploads/2013/10/Who-Makes​
-Minimum-Wage.pdf>.
‡ H. Arthurs, Fairness at Work: Federal Labour Standards for the 21st Century
(Ottawa: Human Resources and Skills Development Canada, 2006) at
247.
In making decisions about what laws to enact, governments are influenced by their perspectives on the role of markets, governments, management, unions, ethics, and power in society and
in the workplace. In this way, how a society governs its labour markets is influenced by the political economy in which its legal rules are produced. Do judges and citizens, and the politicians
they elect, trust that labour markets will produce desirable outcomes? Do existing legal rules
give preference to some interests over others, and, if so, is this distribution of rewards just?
Would a different set of preferences be preferable? The answers to these sorts of questions will
influence the extent and form of legal rules that emerge to govern work in any society. Therefore,
as we learn about these legal rules, we need to be alert to the dominant modes of thinking, or
perspectives, used to justify legal rules.
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Chapter 3 Key Perspectives That Shape the Law of Work 37
Alexandria Ocasio-Cortez attending the third annual Women’s March
in January 2019.
For example, one perspective (perspective A) might view the vast difference between the pay
of Walmart’s CEO and the median pay of Walmart store employees as a healthy and normal
result of market forces. The CEO is “worth” over $22 million annually, while the average retail
employee is “worth” $10 per hour (for example) because that is what the market dictates for
these workers. A perspective A supporter might recall fondly the famous speech by the fictional
character Gordon Gecko (played by actor Michael Douglas) in support of free market forces in
the 1987 movie Wall Street, in which he argued that “greed, for lack of a better word, is good”
because it drives ingenuity and encourages hard work.5
Another perspective (perspective B) might view the vast gap between executive pay and
average worker pay as a failure of the market-based model. While the CEO can afford to live in
a gated mansion with security, yachts, a personal staff, and expensive cars, his employees rely on
food banks and public subsidies to feed their children and pay their rent.6 A perspective B supporter might nod along when New York Congresswoman Alexandria Ocasio-Cortez argues that
“a system that allows billionaires to exist” is immoral in a country where many working people
have no access to health care and there is mass poverty,7 or when US Senator Bernie Sanders
tweets:
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38 Part I The Law of Work: Themes, Frameworks, and Perspectives
Do you know how rich a billionaire is? Let’s say you earn $50k/year & save every. single. penny.
After 20 years, you’d have saved $1 million. After 200 years, you’d be dead, but would have saved
$10 million. Only after 20,000 years(!!!), would you have saved $1 billion.8
If perspective A dominates contemporary social and political thinking, then we should expect few if any new laws to be enacted to address the income gap. However, if perspective B
dominates, then the vast difference between executive and average worker pay would be perceived as a recipe for an unhealthy and economically and politically unstable society. We might
therefore anticipate a new law designed to transfer more wealth from executives down to
average employees.
The varying perspectives on the appropriate role of law in governing work discussed in this
chapter can influence not only the laws governments enact but also the actions, decisions, and
strategies of the other actors who help shape work laws (including employees, employers,
unions, and employer associations). We need to be alert to the background modes of thinking
that shape the actions and laws we will study in this text. Therefore, in this chapter, we introduce
the dominant perspectives that have shaped the development of the law of work in Canada. This
exercise will give us another important tool through which to analyze the laws we will discuss
in the remainder of the text.
II. The Main Perspectives That Shape the Law of Work
Five key perspectives have shaped the debates surrounding the legal regulation of the labour
relationship in Canada (and elsewhere):9
1.
2.
3.
4.
5.
The neoclassical perspective.
The managerialist perspective.
The industrial pluralist perspective.
The critical reformist perspective.
The radical perspective.
These perspectives are summarized in Table 3.1. This taxonomy no doubt oversimplifies the
complexity and richness of each of the perspectives, but it is useful for our purposes here. In
practice, the boundaries between the perspectives are more blurred. Individuals can move
between perspectives from argument to argument, or over their lifetimes. Some laws cannot be
neatly fit into just one of the categories. However, our objective is simply to introduce and identify the dominant strands that have prevailed in work law policy debates over the years. As we
proceed through the text, we will occasionally note how legal policies have reflected, or been
influenced by, shifts in the dominant perspective.
A. The Neoclassical Perspective
The neoclassical perspective is an economics-based view of work law based on the assumption
that labour markets operate generally in the same manner as markets for other goods—labour
is a commodity like all other commodities.10 Neoclassicists assume that labour markets are
perfectly competitive, or nearly so. We will leave it to the economists to explain the details of the
neoclassical economic model.11 Here, we are only concerned with introducing at a general level
how the neoclassical perspective has influenced the law of work.
neoclassical perspective: An economics-based view of the law of work based on the ideal of a perfectly competitive labour
market. It rejects government intervention in labour markets and collective bargaining and argues that employers and individual
employees should set working conditions under a system of freedom of contract.
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Chapter 3 Key Perspectives That Shape the Law of Work 39
TABLE 3.1
Perspectives on the Law of Work
Perspective
Labour Markets
Employment Regulation
Unions/Collective Bargaining
Neoclassical
• Labour markets are presumed to be
perfectly competitive and efficient.
• Regulation artificially raises costs of
labour above optimal market levels
and introduces rigidities, with harmful social and economic
consequences.
• Unions are harmful labour cartels
that artificially raise labour costs and
reduce efficiency, with harmful
economic and social consequences.
• Labour market forces alone should
not determine working conditions if
they result in conditions that do not
maximize employee motivation and
satisfaction.
• Regulation is largely unnecessary,
since employers have an economic
interest in treating workers fairly.
• The desire of workers to support
collective bargaining indicates a
failure of management.
• If necessary to deal with bad
employers, standards should be set
at a low enough level that they do
not impose undue rigidity and costs
on good employers.
• Collective bargaining introduces
harmful rigidity and should be
resisted. However, if employees
choose unionization, the employer
should attempt to work with the
union.
• Labour markets are imperfect and
characterized by a significant imbalance of power between workers and
employers.
• Regulation is necessary to protect
workers from harsh labour market
forces and to ensure a basic and fair
level of working conditions.
• Collective bargaining and unions are
essential to providing workers with a
“voice” and balancing bargaining
power in the labour relationship.
• Regulation is especially important
for workers who do not have the
protection of collective bargaining.
• Collective bargaining is an important
tool in combatting income inequality and promoting democracy in the
workplace and in society more
broadly.
• Unfettered labour markets produce
an optimal allocation of resources.
Managerialist
Industrial
pluralist
Critical
reformist
• Labour markets are imperfect and
characterized by a significant imbalance of power between workers and
employers, especially with regard to
women, youth, visible minorities, and
new immigrants, who tend to be the
most vulnerable workers.
• Strong regulatory protections are
the best way to ensure equitable
employment outcomes in a market
system.
• Collective bargaining is a strong
institution for empowering workers
but has failed to reach the most
vulnerable workers in society.
Radical
• Labour markets are constructs
designed by and for capitalists to
maintain capitalist control and
privilege.
• Regulation is a marginally effective
tool for addressing the exploitation
of labour that is an inevitable outcome of capitalist relations.
• Unions (and collective bargaining)
can be an important and useful
means of raising class consciousness,
but they will have limited impact
unless their focus is on challenging
the capitalist model.
However, since neoclassical prescriptions for work law flow from the assumption that labour
markets are perfectly competitive, we need to know something about what that means. In a
perfectly competitive market, an equilibrium wage rate exists for any given job, which is the
rate “at which workers are willing to supply exactly the number of hours that employers want to
buy.”12 For example, an equilibrium wage rate for baristas of $10 per hour means that every employer in the economy that needs a barista can find one at that rate. The demand for baristas
equals the supply of baristas when $10 per hour is offered.
equilibrium wage rate: A theoretical wage rate fixed through market forces in which the supply of labour (the number
of hours workers are prepared to work) equals the demand for labour (the number of hours purchasers of labour wish to buy).
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40 Part I The Law of Work: Themes, Frameworks, and Perspectives
An employer who offers a wage rate lower than $10 per hour will not be able to attract
baristas. No barista would accept a rate lower than the equilibrium rate, since other employers
offer the equilibrium rate or higher. Workers are assumed to be mobile (able to quit a job and
move to a better job whenever they like, or to stop selling their labour altogether) and to possess full information of all alternative job opportunities. No single barista can bargain a wage
rate higher than the equilibrium rate, since in a perfectly competitive world the employer can
attract all the workers it needs at the equilibrium rate, and all workers are assumed to possess
similar skills.
This description of perfectly competitive labour markets obviously does not describe the real
world. There is no such thing as a perfectly competitive labour market. However, neoclassicists
argue that real-world labour markets “approximate” the theoretical model, so that lessons
learned by studying models of hypothetical, perfectly competitive labour markets should still
guide labour policy.13 Since market forces are assumed to operate competitively and to produce
the most efficient (optimal) outcomes, attempts to interfere in market forces through the introduction of non-market disturbances, such as regulatory standards to protect workers or the
promotion of collective bargaining (and unions), will produce harmful effects, including
unemployment.
The neoclassical perspective rejects all of the regulatory standards legislation we will explore
in Part III. For example, if a government introduced a minimum wage of $12 per hour into a
perfectly competitive labour market for baristas in which the equilibrium wage rate was $10
per hour, employers would respond by hiring fewer baristas, perhaps replacing them with
machines (i.e., substituting capital for labour). Worse still, some employers may simply close
or move outside the reach of the law. In this way, a minimum wage is predicted in the neoclassical perspective to cause higher unemployment.14 This position is reflected in the quotation
from the Fraser Institute, a Canadian think tank that espouses the neoclassical perspective (a
“think tank” is an institution that conducts research and advocates for certain types of policies),
in Box 3.1.
A similar analysis applies to all other wage and non-wage working conditions imposed by
government regulation. Since neoclassicists believe market forces alone produce the optimal
conditions of employment, any legislation that imposes substantive contract terms is wrongheaded and potentially harmful. If a condition of employment were optimal, then the market
would have produced it as a standard term of employment contracts. Hence, employment standards legislation requiring notice to terminate an employment contract is unnecessary, according
to neoclassical law and economics scholar Richard Posner (University of Chicago), because if
employees and employers valued them, these clauses “would be negotiated voluntarily.”15 Similarly, occupational health and safety laws impose costs on employers and are unnecessary,
because markets will produce the most efficient level of safety, and employers have “a selfish
interest in providing the optimal … level of worker health and safety.”16
Nor should governments introduce human rights legislation to prohibit discrimination in
employment. Market forces alone will take care of any employer dumb enough to discriminate
on the basis of factors unrelated to productivity. If women or visible minorities will work for less
than men performing similar work, then rational profit-seeking employers will hire only women
and visible minorities, and discriminating employers who pay more for white men will be driven
out of business or forced to change their discriminatory practices.17 Richard Epstein (University
of Chicago), a scholar in the neoclassical perspective, explains this dynamic as follows:
[T]he employer who sacrifices economic welfare for personal prejudice will pay for her preferences
on the bottom line. By forgoing superior labor in order to hire inferior workers, she will sacrifice
resources to indulge consumption choices, and will be at a systematic disadvantage relative to
employers whose economic motivations are more rational.18
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Chapter 3 Key Perspectives That Shape the Law of Work 41
Neoclassicists argue that attempts to “fix” discrimination through legislation will impose
unnecessary and inefficient costs on employers and will not help the people the laws are
intended to benefit.
Finally, the neoclassical perspective also opposes laws that support or legitimize unionization
and collective bargaining.19 They see unions as a type of harmful cartel, a combination of
workers organized to control the supply of labour in order to artificially raise wages above the
equilibrium wage rate.20 Collective bargaining often results in unionized workers receiving
higher wages and better benefits than non-union workers. In the neoclassical perspective, this
is a bad thing. Those benefits to unionized workers are said to come at the expense of other
non-union workers, employers, shareholders, and consumers, since employers may pay for the
costs of collective bargaining by raising their product costs.21 Thus, in the neoclassical perspective, the laws we will consider under Part III and Part IV are met with suspicion or outright
hostility.
The neoclassical perspective prefers the common law regime (Part II). This preference
makes sense because the foundation of that regime is the notion of “freedom of contract”
between individual employee and employer.22 Law plays a role in this perspective, but a limited
one. Judges should enforce the contracts the parties have agreed to, and governments should
enact legislation to protect contracts and property rights to restrict anti-competitive practices
and, possibly, to promote greater information and mobility in labour markets. Beyond that, the
setting of working conditions should be left to contract and market forces. Since the late 1980s,
the neoclassical perspective has been very influential in North America in shaping debates
about labour policies, especially when politically conservative governments are in power.
B. The Managerialist Perspective
The managerialist perspective is closely linked to human resource management (HRM). It
shares with the neoclassical perspective the belief that government intervention in the labour
relationship should be minimal and that, ideally, unions and collective bargaining should not be
present at a workplace. However, managerialists put their faith in enlightened management
practices rather than theoretically perfect competitive markets. They emphasize that employers
and employees share a community of interest: both want the business to be successful. The
managerialist perspective draws inspiration from the pioneering work of sociologist Elton Mayo
(Harvard University, 1880 – 1949) and his Hawthorne experiments from the late 1920s to the
early 1930s.
Mayo and his researchers concluded that socio-psychological feelings that came from being
studied and working as a team caused employees to be more productive.23 This finding was
crucial to the emergence of the “human relations” school (later HRM), which asserts that workers who are treated well on a psychological level will feel more committed to the employer’s
goals, and this commitment will translate into a more productive labour force. The objective of
management should be to foster cooperation and trust with workers. Employers who mistreat
their employees will suffer economically, which could result in the failure of their business.
Conversely, treating workers decently increases productivity and profits. Therefore, businesses
will look out for employees’ concerns because it is in their economic interest to do so. This belief
is a guiding philosophy of the managerialist perspective.
cartel: A combination of individuals or companies that attempt to use collective force or coordination to fix market prices.
managerialist perspective: A view of the law of work guided by the belief that employers have an economic incentive
to treat employees decently and fairly in order to extract commitment and effort. Government legislation of employment should
be kept at a minimum. Unionization is a response to poor management and is disruptive.
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42 Part I The Law of Work: Themes, Frameworks, and Perspectives
FIGURE 3.1 The Managerialist Perspective Demonstrated in a Corporate
“Employee Charter”
Magna is committed to an operating philosophy which is based on fairness
and concern for people. This philosophy is part of Magna’s Fair Enterprise
culture in which employees and management share in the responsibility to
ensure the success of the company. It includes these principles:
Job Security
Being competitive by making a better product for a better price is the best way to enhance job security.
Magna is committed to working together with you to help protect your job security. To assist you, Magna
will provide job counselling, training and employee assistance programs.
A Safe and Healthful Workplace
Magna is committed to providing you with a working environment which is safe and healthful.
Fair Treatment
discrimination or favouritism.
’
Magna will provide you with information which will enable you to compare your total compensation,
companies your division competes with for people. If your total compensation is found not to be
competitive, your total compensation will be adjusted.
Communication and Information
Through regular monthly meetings between management and employees and through publications,
Magna will provide you with information so that you will know what is going on in your company
and within the industry.
The Hotline
Should you have a problem, or feel the above principles are not being met, we encourage you to
contact the Hotline to register your complaints. You do not have to give your name, but if you do, it
The Hotline is committed to investigate and resolve all concerns or complaints and must report the
outcome to Magna’s Global Human Resources Department.
Hotline Number: 1-800-263-1691
ECMEnCA-US201310
Source: Magna Corporation. Reprinted with permission.
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Chapter 3 Key Perspectives That Shape the Law of Work 43
Magna’s “Employee’s Charter” in Figure 3.1 is consistent with the managerialist perspective
on how employers should treat workers.24 Magna is a large mostly non-union automobile parts
company with its head office in Aurora, Ontario.
In the managerialist perspective, employment regulation should be kept to a minimum, since
these laws inject rigidity into the work relationship and impose unnecessary costs on employers.25 If laws are necessary to deal with the worst types of employers (those who do not perceive
the wisdom in treating workers decently), the legal standards should be set at a low level and be
flexible enough to not punish or hamstring “good” employers.26
Unions and collective bargaining are perceived to be an unnecessary impediment to managerial prerogative and flexibility, so governments should not use law to promote either. The
Human Resources Professionals Association captured the managerialist perspective’s view on
collective bargaining when it proclaimed in marketing a union avoidance webinar that “if you
are union-free, you should try to stay that way” and that to achieve this, “management has to
succeed every single day, forever and always.”27 Since it is in the economic interest of management to treat workers fairly, workers have no need to look to unions for protection. Managerialists argue that the decision of workers to support unionization reflects a failure of management
to address employee needs through progressive HRM policies.28 This idea is captured in the old
HRM adage, “organizations get the unions they deserve.”29
However, because unionization is perceived to be a rational response by employees to perceived employer mistreatment, the managerialist accepts, more so than the neoclassicist, that
unions have a legitimate role to play in protecting workers from abuse at work. Hence, the
managerialist perspective does not call for the outright legal oppression of unions and collective
bargaining, as do the neoclassicists, although it does advocate for the right of employers to resist
their employees’ attempts to unionize and for a system that permits employees to easily remove
a union.30
C. The Industrial Pluralist Perspective
The industrial pluralist perspective views the work relationship very differently than both the
neoclassical and managerialist perspectives. The guiding insight of the industrial pluralist perspective is that an inherent imbalance of power exists between employees and employers that is
problematic for both social and economic reasons. In the unfettered labour market model
favoured by neoclassicists, individual workers lack the ability to safely voice their concerns or
desires for fear of losing their job (they lack “voice”). This lack of voice leaves workers without
the means to participate in decisions that can significantly influence their lives.
Individual workers also lack sufficient bargaining power to negotiate above whatever level
of working conditions the employer is prepared to offer. While this lack of power may benefit
employers and business owners, industrial pluralists argue that it produces vastly unequal societies in which the wealth created through worker labour tends to gravitate upward to a relatively small proportion of wealthy elite. The resulting income inequality produces an
unsustainable and volatile economy, which plants the seeds for political instability. Thus, for the
industrial pluralist, creating or encouraging countervailing power to that of employers should
be a central public policy objective of laws governing work. The best approach to rectifying this
imbalance is for the law to promote collective bargaining, in which unions or other employee
associations that are independent of the employer negotiate with employers on behalf of
workers.
industrial pluralist perspective: A view of the law of work that emphasizes the inequality of bargaining power between
employers and employees and advocates especially for collective bargaining and unions as a means of empowering workers so
that they can bargain fairer employment outcomes.
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44 Part I The Law of Work: Themes, Frameworks, and Perspectives
This emphasis on inequality of bargaining power in the capitalist employment relationship,
and its perceived harmful effects, is shared with the next two perspectives we will consider (the
critical reformist and radical perspectives). All three dismiss as naive and empirically false the
managerialist’s claim that employers, through progressive HRM policies, will voluntarily strike
an acceptable balance between the competing interests of employees and employers. They also
reject the “free market” prescriptions of neoclassicists, arguing that the models on which they
are based bear no resemblance to the real world, favour the interests of employers and society’s
wealthy and powerful elite, and produce vast economic inequality.31 The differences between
these last three perspectives rest primarily on the focus of their critiques and on the types of
solutions they prescribe to address the problems.
Industrial pluralists argue that the goal of law in relation to work and employment should be
to strike an appropriate balance between the efficiency concerns of employers, on the one hand,
and the equity concerns of workers on the other hand.32 To achieve this goal, the industrial pluralist supports regulatory labour standards that promote a basic floor of adequate working
conditions. However, their main objective is to promote unionization and collective bargaining
(discussed in Part IV). Collective employee representation is considered the most effective way
to ensure worker voice and promote a healthy distribution of wealth throughout the economy.
Collective bargaining, including a legal right to withhold labour (to strike), empowers workers
by putting them on a more equal footing as they bargain for the sale of their labour. It better
ensures that workers can bargain a reasonable share of the economic pie produced by their
labour—a result that benefits the economy (by fuelling consumption) and society (by producing
a decent standard of living).33 Box 3.2 features the benefits of collective bargaining according to
industrial pluralists.
BOX 3.2 » TALKING WORK LAW
The Benefits of Collective Bargaining
Industrial pluralists argue that collective bargaining is valuable
because it promotes several important outcomes:
• Democracy and voice. It introduces a form of democracy
into the workplace by giving workers the tools and
power to participate directly in the development and
enforcement of workplace rules and practices.*
• Distributive fairness. It empowers workers to bargain a
larger share of the economic pie than is possible in the
alternative system in which individual employees bargain for the sale of their labour. The result is a stronger
middle class and less income inequality, which, according to industrial pluralists, facilitates a healthier
economy and more stable society.†
• Improved productivity. In a much-cited (and debated)
1984 book entitled What Do Unions Do?, Harvard University economists Richard Freeman and James Medoff
concluded that collective bargaining tends, overall, to
improve productivity slightly, although results vary
across employers and sectors.‡ The explanations provided for this result included the observation that
unionized workers have lower turnover rates and that
collective bargaining “shocks” management into implementing more efficient processes.§
* For discussion of the “voice” effects of collective bargaining, see Weiler,
infra note 31; R. Freeman & J. Medoff, What Do Unions Do? (New York:
Basic Books, 1984); G. Davidov, “Collective Bargaining Laws: Scope and
Purpose” (2004) 20:1 Intl J Comp Lab L & Ind Rel 81-106 at 86; C. Craver,
“Why Labor Unions Must (and Can) Survive” (1998) 1:1 U Pa J Lab &
Employment L 15-47; K. Klare, “Workplace Democracy and Market
Reconstruction” (1988) 38 Cath U L Rev 1. See also Davies, supra note 9 at
183-85; and D. Doorey, “Graduated Freedom of Association: Worker Voice
Beyond the Wagner Model” (2013) 38:2 Queen’s LJ 515-48 at 516-20.
† See discussion and sources cited in Lynk, “Labour Law and the New
Inequality,” infra note 34.
‡ Freeman & Medoff, supra note *. See also J. Bennett & B. Kaufman, What
Do Unions Do? A Twenty Year Perspective (New Brunswick, NJ:
Transaction, 2004).
§ M. Gunderson & D. Hyatt, “Union Impact on Compensation, Productivity,
and Management of the Organization,” in M. Gunderson & D. Taras, eds,
Canadian Labour and Employment Relations, 6th ed (Toronto: Pearson,
2009) 383 at 392-94.
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Chapter 3 Key Perspectives That Shape the Law of Work 45
Industrial pluralists emphasize the link between collective bargaining and income equality.
For example, the International Labour Organization (ILO), the leading global institution that
promotes collective bargaining around the world, found that income inequality is lower in countries “in which a greater proportion of workers are affiliated with trade unions.”34 Figure 3.2
depicts the relationship between declining unionization and increasing income inequality
(as measured by the Gini coefficient) in Canada from 1980 to 2010.
Industrial pluralists argue that income inequality is a dangerous social and economic
problem, and that laws promoting decent working conditions and protecting the workers’ right
to collective bargaining must be part of the solution. Industrial pluralism was the dominant
perspective in Canadian politics from the late 1940s until the late 1980s, with all of the major
political parties supporting collective bargaining.35 Unions represented almost 40 percent of
Canadian workers in the mid-1980s, before union density began a decline to its current (2018)
rate of about 28.1 percent overall (and about 16 percent in the private sector).36
FIGURE 3.2
Union Coverage and Income Inequality in Canada
0.44
44%
0.42
42%
0.40
38%
0.38
36%
0.36
Union Coverage
2010
2008
2006
2004
2002
2000
1996
1996
1994
1992
0.30
1990
30%
1988
0.32
1986
32%
1984
0.34
1982
34%
Gini Coefficient (range 0-1.00)
40%
1980
Union Coverage (%)
Gini Coefficient
Source: H. Mackenzie & R. Shillington, “The Union Card: A Ticket Into Middle Class Stability,” (May 2015) at 8, online (pdf): <https://www​
.policyalternatives.ca/sites/default/files/uploads/publications/National%20Office/2015/05/Union_Card.pdf>.
Gini coefficient: A statistical measure of economic inequality that measures the extent to which income distribution among
individuals or households within a population deviates from a perfectly equal distribution. The higher the number over 0, the
higher the inequality. In a population with a Gini score of 0.0, everyone earns the same amount. In a population with a score
of 1.0, one person earns all the income.
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46 Part I The Law of Work: Themes, Frameworks, and Perspectives
D. The Critical Reformist Perspective
As noted above, the world view of the critical reformist perspective shares much in common
with the industrial pluralist perspective. However, the critical reformist perspective is more critical of the outcomes actually produced by collective bargaining in Canada.37 In practice, collective bargaining has historically benefited certain privileged segments of the working population
and not reached the most vulnerable workers. Professor John Godard (University of Manitoba)
describes this point:
[Critical reformists] tend to be highly supportive of labour unions and collective bargaining, but they
are at the same time often highly critical of the system within which unions currently operate. Their
general argument is that … unions tend to be least effective in the workplaces where workers are
most in need of assistance.38
A particularly rich strand of the critical reformist literature involves feminist critiques of
collective bargaining in Canada. Professor Judy Fudge (McMaster University) captured the
essence of this critique:
Despite the fact that collective bargaining is gender neutral on its face—at best it assumes a sexless
worker, at worst an all male cast. Mostly, it has been done by men for the benefit of men. Its theorists are mostly men, as are its functionaries: arbitrators, board members, union leaders, managers,
and lawyers. One of the presumptions of the postwar social consensus was that the labour force
was unfragmented; that it was composed of full-time male workers in regular and secure employment. Unions bargained for a family wage for their male members. Until recently, women were
ignored.39
By 2018, more women (32.3 percent) were covered by collective agreements bargained by
unions than men (27.9 percent), primarily because most unionized workers are in the public
sector, where women are highly represented.40 However, critical reformists emphasize that most
vulnerable or precarious jobs (see the discussion in Chapter 4) in Canada are still filled by
women, visible minorities, the disabled, young workers, and new immigrants. These jobs are still
mostly non-union and are characterized by low pay, job insecurity, lack of benefits, and greater
risk of injury.41
Critical reformists are interested in how legal rules and structures have failed to protect Canada’s most vulnerable workers. First, the common law model (Part II) requires workers to “bargain” improvements on their own, but precarious workers lack the bargaining power to do so.
Second, although regulatory standards (Part III) often (although not always) apply to these
workers, in practice, government enforcement is wanting, compliance with the law is low, and
the workers do not have the means and knowledge to enforce the laws on their own.42 Third,
collective bargaining law (Part IV) remains irrelevant to Canada’s most vulnerable workers,
since unions lack the desire or capacity (or both) to effectively represent these workers under
our existing legal models.
Therefore, the focus of this perspective is on critiquing existing legal structures that fail vulnerable workers—especially women, visible and religious minorities, new immigrants, and
young workers—and on proposing legal reforms that would do a better job in this regard. Critical reformists focus on the legal possibilities for more robust and broad-reaching systems of
collective representation and resistance than are offered by existing collective bargaining legal
models as well as more effective regulatory standards legislation.43
critical reformist perspective: A view of the law of work that supports both collective bargaining and regulatory standards, but emphasizes how both have tended to fail the most vulnerable workers. This perspective focuses on how laws can be
reformed to better protect these workers.
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Chapter 3 Key Perspectives That Shape the Law of Work 47
E. The Radical Perspective
The focus of the radical perspective in relation to work law is on the recurrent “regulatory
dilemmas” that by necessity define all capitalist labour markets.44 This perspective builds on the
insights and arguments of Karl Marx. Very briefly, Marx observed that most workers in a capitalist society lack the property necessary to create value through their labour power. Therefore,
they must enter a crowded labour market to sell their labour power to those who own property
(employers) to survive, since few have independent means of wealth.
From the employer’s perspective, the worker represents a unit of production (a commodity),
and the objective is to extract maximum labour effort from that unit at minimal cost to produce
profits. However, workers have non-productive needs too; they are humans who seek personal
fulfillment and development both at work and in the non-work sphere. They seek earnings from
selling their labour to aid in fulfillment of those needs. This dynamic is the source of the regulatory dilemma that confronts all capitalist economies. Employers and workers have conflicting
interests. Laws that restrict an employer’s ability to extract maximum effort at minimum cost to
protect workers will come at the expense of the employer’s interests in maximizing profits.
Professor Eric Tucker (York University) summarizes the conflict as follows:
[A]t each phase in the circuit of capital, the need of workers for self-development confronts the logic
of capital, which seeks to reduce workers to commodity sellers in competition with each other, to
exercise control over their productive capabilities, to shape their needs and to appropriate for themselves the surplus value that is realized in the … process of production.45
The emphasis of the radical perspective is on the various class struggles that arise in a society
as workers seek to overcome the inherently exploitive nature of capitalism. This emphasis leads
to a different perspective on the role of law in labour markets than the other perspectives we
have considered. The emphasis in the radical perspective is on either reforming the capitalist
model or, more likely, supplanting it altogether with a different model in which power is more
equally distributed throughout society. In common with the critical reformist and industrial
pluralist perspectives, the radical perspective is highly critical of both the neoclassical and
managerialist perspectives. Both of those latter perspectives downplay the crucial role that capitalist models and institutions play in creating the power imbalance that so often leads to worker
exploitation as employers pursue more profits.
The relationship among the radical, industrial pluralist, and critical reformist perspectives
is more complex. The radical perspective is generally supportive of regulatory standards and
unions and collective bargaining, like the other two perspectives. Regulatory standards can
protect workers from the worst types of employer abuses, and unions can be a means of raising
class consciousness and of extracting greater benefits from employers through collective
action. Therefore, all three perspectives tend to agree on the need for employment regulation
and strong unions. All three also recognize that there will be unavoidable conflict in work
relations.
However, radicals accuse industrial pluralists (and to a lesser degree critical reformists) of
ceding too much to the capitalist model.46 Industrial pluralists tend to accept that, with effective
regulatory standards laws and strong unions, employees’ interests can be effectively addressed
within the capitalist model (albeit occasionally with conflict in the form of strikes or other forms
of employee resistance).47 Radicals argue that, although regulatory standards and laws that protect and promote collective bargaining can serve a useful role, it is a limited role. Capitalism will
radical perspective: A view of the law of work inspired by Karl Marx’s insights and criticisms of the capitalist system. It
considers regulatory standards regulation and collective bargaining to be helpful but limited in their ability to respond to the
exploitive nature of capitalism. This perspective advocates for a more fundamental transformation of the economic model.
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48 Part I The Law of Work: Themes, Frameworks, and Perspectives
always work to the advantage of capital; the party that owns the means of production, by virtue
of its economic power, will always have greater influence on and access to the political processes
that produce legal rules. Therefore, radicals focus much more on the problems of the capitalist
model and on class-based resistance to it than do industrial pluralists.
The distinction between the radical and critical reformist perspectives is the most blurred.
Both perspectives critique the limited success of unions and collective bargaining in Canada to
fundamentally address many types of worker exploitation and mistreatment, yet both are generally supportive of collective bargaining as an institution. However, a belief that exploitation of
workers can be fundamentally addressed through the enactment of “better” or different types of
regulatory standards (Part III) than presently exist is a critical reformist argument rather than a
radical argument. The radical perspective demonstrates less confidence than does the critical
reformist perspective in the ability of capitalism to be tamed by protective employment standards regulation.
The radical perspective played an important role in the development of Canadian work law,
particularly during the formative years of the Canadian collective bargaining regime. Radicalinspired organizations, such as the Communist Party of Canada, organized unions and led
strikes in the early 20th century that contributed to the climate of industrial worker resistance
that laid the groundwork for labour legislation that survives to this day.48 Growing income
inequality, large-scale global economic downturns and unemployment, and corporate corruption have spawned renewed interest in the radical perspective and Marx’s work.49
III. Chapter Summary
The purpose of this chapter is to introduce the main schools of thought, or perspectives, that
have tended to guide law of work debates. In practice, the lines between the perspectives are
much more blurred than they appear to be in this chapter; people and organizations can agree
with elements of multiple perspectives at once, or they can shift from one perspective to another
depending on the issues being debated. However, the categories presented here are nevertheless
useful for the journey we have begun.
These perspectives help shape the law of work in a variety of ways. The most obvious is that
they influence key policy debates within the political subsystem that produces the legal regulation of work. Often we see reference to the perspectives explicitly in the political speeches and
propaganda disseminated by politicians and political parties. Academics and think tanks that
research and write about work law often have an allegiance to one or more of these perspectives,
and their views and arguments can influence legal developments. Public opinion on the role and
form of work laws can reflect one or more of these perspectives, and that opinion in turn influences the beliefs and actions of lawmakers, workers, employers, and associations, as well as
judges and adjudicators who enforce legal rules. An understanding of the dominant perspectives will help readers recognize their influence as we proceed through the text.
QUESTIONS AND ISSUES FOR DISCUSSION
1. Briefly explain the key components of the five perspectives in work law identified in this
chapter.
2. Which of the perspectives are supportive of the regulatory standards regime, and which
are not?
3. What are the arguments for and against unions and collective bargaining presented in this
chapter?
4. What distinguishes the industrial pluralist, critical reformist, and radical perspectives?
5. What distinguishes the neoclassical and managerialist perspectives?
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Chapter 3 Key Perspectives That Shape the Law of Work 49
EXERCISES
1. Locate a media story that considers a debate about work law reform in Canada. Can you
identify arguments in the story that can be associated with one of the perspectives discussed in this chapter?
2. The new provincial minister of labour has little background in law or labour relations,
having operated a small non-union business most of her career. However, she is concerned
about a report she read indicating that income inequality in Canada is growing rapidly and
that “real wages” (wage levels relative to rising costs of living) are falling for many workers.
She wants to explore ways to halt these trends. In particular, she is considering two proposals: (1) raising the minimum wage, and (2) amending labour laws to encourage more
unionization. You are the deputy minister. The minister has asked you to prepare a short
briefing memo for her that provides background on the various perspectives that traditionally shape debates about workplace law reform.
Prepare a memo for the minister that examines how the perspectives considered in this
chapter would likely perceive the two proposals she is considering. Then explain to the
minister which of these perspectives best describes your own viewpoint and why.
NOTES AND REFERENCES
1. “Wal-Mart Stores, Inc.,” online: Fortune 500 <http://​
fortune.com/fortune500/2017/walmart>.
2. “Six C.E.O. Pay Packages That Explain Soaring Executive
Compensation,” New York Times (25 May 2018), online:
<https://www.nytimes.com/2018/05/25/business/top-ceo​
-pay-packages.html>.
3. Ibid. See also G. Kessler, “Does the Walton Family Earn
More in a Minute than Walmart Workers Do in a Year?”
Washington Post (19 February 2019), online: <https://www​
.washingtonpost.com/politics/2019/02/19/does-walton​
-family-earn-more-minute-than-walmart-workers-year/​
?noredirect=on&utm_term=.71e7a98
b94a2>.
4. See the discussion and sources presented in D. Doorey,
“Is It Time to Regulate ‘Maximum’ Pay in Canada?”
online, Law of Work (blog): <http://lawofwork​.ca/​
?p=4427>. See also D. Gruending, “Canadian CEOs Make
171 Times Average, Let’s Talk Maximum Wage,” Rabble.ca
(2 March 2014), online: <http://rabble.ca/blogs/​bloggers/​
dhg/2014​/03/canadian-ceos-make-171-times-average-lets​
-talk​-maximum-wage>; and M. Sabnavis, “Bank CEO
Compensation: Should There Be a Cap on Pay of Top
Bankers?” Financial Express (7 March 2019), online:
<https://www​.financialexpress.com/opinion/bank-ceos​
-compensation​-should​-there​-be​-a​-cap​-on​-pay​-of​-top​
-bankers/1507447>.
5. Wall Street (Twentieth Century Fox, 1987).
6. E. Fox, “Wal-Mart’s Low Wages Cost Taxpayers,” CNN
Money (5 June 2013), online: <http://money.cnn.com/​
2013/​06/​04/news/companies/walmart-medicaid>.
7. R. Joseph, “Alexandria Ocasio-Cortez Says ‘System That
Allows Billionaires Is Immoral,’” Global News (22 January
2019), online <https://globalnews.ca/news​/​
4875107/alexandria​-ocasio​-cortez​-system​-billionaires​
-immoral>.
8. M. Day, “Bernie Against the Billionaires,” Jacobin Magazine (2 March 2019), online: <https://www.jacobinmag​
.com/2019/02/bernie-sanders-estate-tax-proposal-2020​
-president>.
9. This is a common taxonomy found in industrial relations
textbooks and scholarship, although terminology can vary.
See, e.g., J. Godard, Industrial Relations, the Economy, and
Society, 4th ed (Concord, ON: Captus Press, 2011) at 9-18;
and R. Hebdon & T. Brown, Industrial Relations in
Canada, 2nd ed (Toronto: Nelson, 2012) at 16-17. See also
A. Davies, Perspectives on Labour Law, 2nd ed (Cambridge: Cambridge University Press, 2009); and J. Budd &
D. Bhave, “The Employment Relationship,” in A. Wilkinson, T. Redman, S. Snell & N. Bacon, eds, Sage Handbook
of Human Resource Management (London: Sage, 2010)
51-70.
10. A. Alchian and W. Allen, University Economics, 3rd ed
(Belmont, CA: Wadsworth, 1972) at 407-8.
11. Extensive literature exists on the application of the neoclassical economics model to labour markets. Most standard
labour market economics texts explain the model. See, e.g.,
Alchian & Allen, supra note 10; and R. Ehrenberg, R.
Smith & R. Chaykowski, Modern Labour Economics:
Theory and Public Policy (Toronto: Pearson, 2004) at 44-57.
For a discussion on and critique of the neoclassical
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50 Part I The Law of Work: Themes, Frameworks, and Perspectives
perspective as applied to labour markets, see B. Kaufman,
“Economic Analysis of Labor Markets and Labor Law: An
Institutional/Industrial Relations Perspective,” in C.
Estlund & M. Wachter, eds, Research Handbook on Economics of Labor and Employment Law (Northampton, MA:
Edward Elgar, 2012) at 52. See also Davies, supra note 9 at
26-32; B. Kaufman, “The Impossibility of a Perfectly Competitive Labour Market” (2007) 31 Cambridge J Econ 775;
J. Stanford, Economics for Everyone (London: Pluto Press,
2008) at 99-110; and J. Stiglitz, “Employment, Social Justice
and Societal Well-Being” (2002) 141 Intl Lab Rev 9.
12. Davies, supra note 9 at 26. Since no individual employer or
employee can influence the market-wide equilibrium wage
rate for jobs, neoclassical economists say that everyone is a
“price taker” in the labour market. Employers will hire the
number of employees they require at the equilibrium wage
rate.
13. Kaufman, “Economic Analysis,” supra note 11 at 58-61.
The assumption that real-world labour markets approximate the perfectly competitive theoretical models is
among the mostly hotly contested topics in work law. See
Stiglitz, supra note 11.
14. See R. Posner, Economic Analysis of Law, 5th ed (New
York: Aspen, 1998) at 361; and Davies, supra note 9 at
139-42. Neoclassicists also argue that the harmful effects of
employment regulation are disproportionately experienced
by the least advantaged workers. See the video clip of neoclassicist Milton Friedman on the minimum wage at
<http://lawofwork.ca/?p=6648>.
15. Posner, supra note 14 at 359; and R. Epstein, “In Defense
of the Contract at Will” (1984) 51 U Chicago L Rev 947.
16. Posner, supra note 14 at 363.
17. G. Becker, The Economics of Discrimination (Chicago: University of Chicago Press, 1957); and R. Epstein, Forbidden
Grounds: The Case Against Employment Discrimination
Laws (Cambridge: Harvard University Press, 1992).
18. R. Epstein, Simple Rules for a Complex World (Cambridge:
Harvard University Press, 1995) at 176.
19. R. Epstein, “A Common Law of Labor Relations: A Critique of the New Deal Labor Legislation” (1983) 92 Yale LJ
1357.
20. Posner, supra note 14 at 350-58.
21. R. Epstein, “The Case Against the Employee Free Choice
Act” (working paper, University of Chicago Law and Economics Olin Working Paper No. 452, 2009), online:
<https://chicagounbound.uchicago.edu/cgi/viewcontent
.cgi?article=1493&context=law_and_economics>.
22. Davies, supra note 9 at 28: “[N]eoclassical economists are
strong advocates of the doctrine of freedom of contract.
This means that people should be allowed to enter into
contracts with whomever they choose, on whatever terms
they wish. The law should only interfere where there is evidence that a person has not given his or her genuine
consent, for example, in case of duress or undue influence.”
23. E. Mayo, The Social Problems of an Industrialized Civilization (Abingdon, UK: Routledge, 2007).
24. See the Magna “Employee’s Charter” for Canada/USA at
the company’s website: <https://www.magna.com​/
company/for-employees/our-culture/employees-charter>.
25. Godard, supra note 9 at 15.
26. D. Doorey, “A Model of Responsive Workplace Law”
(2012) 50:1 Osgoode Hall LJ 47 at 67-76; and J. Budd & D.
Bhave, “The Employment Relationship,” in A. Wilkinson,
T. Redman, S. Snell & N. Bacon, eds, Sage Handbook of
Human Resource Management (London: Sage, 2010) at 64.
27. See “Human Resource Professional Association Offers
Credit for Union Avoidance Education,” online, Law of
Work (blog) (2 November 2010): <http://lawofwork.ca/
?p=2340>.
28. See M. Belcourt, G. Bohlander & S. Snell, Managing
Human Resources, 6th ed (Toronto: Nelson Education,
2010) at 556.
29. T. Humber, “Good HR Makes Union Growth Harder,” HR
Reporter (30 May 2017), online: <https://www.hrreporter
.com/sharedwidgets/systools/_printpost_.aspx?articleid
=2276>.
30. Doorey, supra note 26.
31. Kaufman, “Economic Analysis,” supra note 11; and P.
Weiler, Governing the Workplace: The Future of Labor and
Employment Law (Cambridge, MA: Harvard University
Press, 1990).
32. J. Budd, R. Gomez & N. Meltz, “Why a Balance Is Best:
The Pluralist Industrial Relations Paradigm of Balancing
Competing Interests,” in B. Kaufman, ed, Theoretical Perspectives on Work and the Employment Relationship
(Champaign, IL: Industrial Relations Research Association, 2004); N. Meltz, “Industrial Relations: Balancing Efficiency and Equity,” in J. Barbash & K. Barbash, eds,
Theories and Concepts in Comparative Industrial Relations
(Columbia, SC: University of South Carolina Press, 1989);
H. Collins, Employment Law, 2nd ed (Oxford: Oxford University Press, 2010) at 5; and J. Budd, Employment with a
Human Face: Balancing Efficiency, Equity, and Voice
(Ithaca, NY: ILR Press, 2004). Foundational works in
industrial pluralism include J. Commons, Industrial Goodwill (New York: McGraw-Hill, 1919); S. Webb & B. Webb,
Industrial Democracy (London: Longmans, Green, 1897);
and J. Commons, A History of Labor in the United States
(New York: Macmillan, 1919). In Canada, a leading voice
in industrial pluralism was Harry Arthurs. See especially
H. Arthurs, “Understanding Labour Law: The Debate over
‘Industrial Pluralism’” (1985) 38 Curr Legal Probs 83.
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Chapter 3 Key Perspectives That Shape the Law of Work 51
33. See the argument by Professor Robert Reich (University of
California, Berkeley), who was formerly US secretary of
labor, on how unions and collective bargaining promote a
healthy economy in “Why We Need Stronger Unions, and
How to Get Them,” online, Robert Reich (blog) (27 January
2009): <http://robertreich.org/post/257310148>.
34. International Labour Organization, World of Work 2008:
Income Inequalities in the Age of Financial Globalization
(Geneva: ILO, 2008) at 83; S. Dynarski, “Fresh Proof that
Strong Unions Help Reduce Income Inequality,” New York
Times (6 July 2018), online: <https://www.nytimes.com​
/2018/07/06/business/labor-unions-income-inequality​
.html>; and A. Semuels, “Fewer Unions, Lower Pay for
Everybody,” The Atlantic (30 August 2016), online: <https://
www.theatlantic.com/business/archive/2016/08​/​unioninequality-wages/497954>. See also discussion in the Canadian context by M. Lynk, “Labour Law and the New
Inequality” (2009) 15 Just Lab 125, online (pdf): <http://
www.justlabour.yorku.ca/volume15/pdfs/11_lynk_press​
.pdf>.
35. For a discussion of the rise and fall of industrial pluralism
in Canada, see L. Panitch & D. Schwartz, From Consent to
Coercion: The Assault on Trade Union Freedoms, 3rd ed
(Aurora, ON: Garamond, 2003); and H. Arthurs, “Landscape and Memory: Labour Law, Legal Pluralism, and
Globalization,” in T. Wilthagen, ed, Advancing Theory in
Labour Law and Industrial Relations in a Global Context
(Amsterdam: Koninklijke Nederlandse Akademie van
Wetenschappen, 1998) at 21.
36. Statistics Canada, “Union Status by Geography,” Table
14-10-0129-01, online: <https://www150.statcan.gc.ca/t1​/​
tbl1/en/tv.action?pid=1410012901>; Statistics Canada,
“Union Status by Industry,” Table 14-10-0132-01, online:
<https://www150.statcan.gc.ca/t1/tbl1/en/tv.action?pid=​
1410013201>.
37. A. Forrest, “Organizing Eaton’s: Do the Old Laws Still
Work?” (1988) 8 Windsor YB Access Just 190.
38. Godard, supra note 9 at 15. Godard labels this perspective
“liberal-reformist.”
39. J. Fudge, “Reconceiving Employment Standards Legislation: Labour Law’s Little Sister and the Feminization of
Labour” (1991) 7 JL & Soc Pol’y 73 at 77. See also D.
Beatty, “Ideology, Politics, and Unionism,” in K. Swan & K.
Swinton, eds, Studies in Labour Law (Toronto: Butterworths, 1983) 299; J. Conaghan, “The Invisibility of
Women in Labour Law: Gender Neutrality in ModelBuilding” (1986) 14 Intl J Soc L 377; and J. White, Sisters in
Solidarity: Women and Unions in Canada (Toronto:
Thompson Educational, 1993).
40. See Statistics Canada, “Union Status by Industry,”
supra note 36; there is a pull down window to search by
gender.
41. See the collected works in L. Vosko, ed, Precarious Employment: Understanding Labour Market Insecurity in Canada
(Montreal: McGill-Queen’s University Press, 2006); and
Law Commission of Ontario, Vulnerable Workers and Precarious Work (Toronto: Law Commission of Ontario,
2012), online: <https://www.lco-cdo.org/en/our-current​
-projects/vulnerable-workers-and-precarious-work​/​
vulnerable-workers-and-precarious-work-final-report​
-december-2012>; and the discussion on precarious work
in Chapter 4.
42. M. Thomas, Regulating Flexibility: The Political Economy of
Employment Standards (Montreal: McGill-Queen’s University Press, 2009).
43. Recent literature from a critical reformist perspective
includes C. Cranford, T. Das Gupta, D. Ladd & L.
Vosko, “Thinking Through Community Unionism,” in
Vosko, supra note 41 at 353; J. Fudge, “After Industrial Citizenship: Market Citizenship or Citizenship at Work?”
(2005) 60 RI 631; K. Rittich, “Feminization and Contingency: Regulating the Stakes of Work for Women,” in J.
Conaghan, R.M. Fischl & K. Klare, eds, Labour Law in
an Era of Globalization: Transformative Practices and Possibilities (Oxford: Oxford University Press, 2002); K.
Stone, “Rethinking Labour Law: Employment Protection
for Boundaryless Workers,” in G. Davidov & B. Langille,
eds, Boundaries and Frontiers of Labour Law (Oxford:
Hart, 2006) at 155; and A. Blackett, “Emancipation in the
Idea of Labour Law,” in G. Davidov & B. Langille, eds, The
Idea of Labour Law (Oxford: Oxford University Press,
2011).
44. See, e.g., E. Tucker, “Reforming Labour Law: Can We
Escape Labour Law’s Recurring Regulatory Dilemmas?”
(2010) 39:2 Indus LJ 99; M. Lebowitz, Beyond Capital, 2nd
ed (New York: Palgrave Macmillan, 2003); R. Hyman,
“Pluralism, Procedural Consensus, and Collective Bargaining” (1978) 16 Brit J Indus Rel 16; and H. Braverman,
Labour and Monopoly Capital: The Degradation of Work in
the Twentieth Century (New York: Monthly Review Press,
1974).
45. Tucker, supra note 44 at 108.
46. Tucker, supra note 44 at 113-15. See also Godard, supra
note 9 at 16-17; and R. Hyman, Industrial Relations: A
Marxist Introduction (London: Macmillan, 1975).
47. Godard, supra note 9. See also Budd, Gomez & Meltz,
supra note 32.
48. On the sporadic role of the Communist Party in Canadian
labour history, see J. Fudge & E. Tucker, Labour Before the
Law: The Regulation of Workers’ Collective Action in
Canada, 1900-1948 (Don Mills, ON: Oxford University
Press, 2001); and D. Morton, Working People, 5th ed
(Montreal and Kingston: McGill-Queen’s University Press,
2007).
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52 Part I The Law of Work: Themes, Frameworks, and Perspectives
49. See, e.g., T. Eagleton, Why Marx Was Right (New Haven,
CT: Yale University Press, 2011); S. Jeffries, “Why
Marxism Is on the Rise Again,” Guardian (4 July 2012),
online: <http://www.theguardian.com/world/2012/jul/04​/
the-return-of-marxism>; and R. Varghese, “Marxist
World: What Did You Expect from Capitalism?” Foreign
Affairs (July/August 2018), online: <https://www​
.foreignaffairs.com/articles/world/2018-06-14/
marxist-world>.
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CHAPTER 4
What Is Employment?
LEARNING OBJECTIVES
CHAPTER OUTLINE
After reading this chapter, students will be able to:
I. Introduction 53
II. Legal Tests for Determining Employment Status 54
A. The Common Law Tests for Employment Status 56
B. Employment Status in the Regulatory and Collective
Bargaining Regimes 59
III. Is the Distinction Between Employee and Independent
Contractor Appropriate? 63
IV. Chapter Summary 64
Questions and Issues for Discussion 64
Notes and References 66
• Distinguish between an employee, an independent contractor, and a
dependent contractor.
• Explain why this distinction is important in the law of work.
• Explain how the courts, administrative tribunals, and governments (in
statutes) distinguish between the different groups of workers.
• Explain how employees are often misclassified as independent
contractors or unpaid interns or trainees with the result that they are
excluded from employee protections in the law.
• Discuss contemporary debates about whether it still makes good policy
sense to rely on the technical legal distinction between “employees” and
“independent contractors.”
I. Introduction
Samir was a taxi driver in Ottawa. He owned his own car and paid the car’s expenses, including the
insurance. He did not own the taxi licence that permitted him to use his car as a taxicab, so he rented
one. Samir decided what hours to work and where in the city to focus his efforts. He could hire
another worker to drive his car when he was not available. He was not paid a wage; his compensation comprised the amount of fares received from customers remaining after paying his expenses.
One of those expenses was a fee paid to a dispatch company called Blue Line Taxi. That fee
entitled Samir to pick up customers at designated Blue Line taxi stands in Ottawa, and to use a
two-way radio system through which Blue Line assigned customers to taxi drivers. By agreeing
to drive his car under the Blue Line Taxi banner, Samir subjected himself to a set of rules prepared by Blue Line relating to dress code and treatment of customers, among others. If Samir
violated one of these rules, Blue Line could suspend him from access to the dispatch service.
Late one night, on a quiet and dark street, a customer sliced Samir’s throat and ran from the
car. Samir suffered serious injuries, as well as trauma that prevented him from ever driving a
taxicab again. He was unable to do any job for a long while, and he applied for benefits under
workers’ compensation legislation, which creates a government-controlled insurance plan to
compensate employees injured in the course of their employment (see Chapter 24). However, he
was at first denied the benefits because he was found not to be an employee of Blue Line. The
adjudicator ruled that Samir was an independent contractor, in business for himself and therefore
not covered by workers’ compensation legislation, which only insures employees. Samir appealed,
and the workers’ compensation appeals tribunal overturned that decision and ruled that he was
an employee of Blue Line and, therefore, was entitled to workers’ compensation benefits.1
It might seem strange that an issue so important to Samir and his family turns on a narrow,
technical legal distinction between employment and not employment. Yet, as mentioned in
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53
54 Part I The Law of Work: Themes, Frameworks, and Perspectives
Chapter 1, this question of employment status—whether a
worker is characterized as an employee or a “self-employed”
independent contractor—is a central boundary issue in the
law of work.
Common law judges and governments (through legislation) have developed a complex system of legal rules to regulate the employment relationship. Most of the material
considered in this book relates to those rules, which do not
apply to workers who are characterized as independent contractors. Nor do they apply to types of work that are not recognized as being part of the formal labour market at all, such
as caring for your children or other family members and
other types of unpaid work, such as volunteer work.
This chapter explores how the courts and governments
have drawn boundaries around the employment relationship for the purposes of developing and
assigning special legal rules to that relationship. We need to confront the question of how the
law distinguishes between work performed through the institution of “employment” from work
performed through all other sorts of arrangements at the outset of our journey, because it is a
fundamental question that transcends all three legal regimes: common law, regulatory law, and
collective bargaining law. We will also look at how courts and governments have sometimes
recognized a hybrid category of “dependent contractor,” which lies in between a true employee
and a true independent contractor to extend the reach of employment-related legal rules to economically vulnerable contractors. Finally, we will consider the policy question of whether this
distinction between employment and not employment still makes sense as a way of defining who
should be entitled to work-related protections and other social benefits, such as Employment
Insurance.
II. Legal Tests for Determining Employment Status
An employee is a worker who enters into an employment contract with an employer that involves
an exchange of labour for wages (and maybe benefits), and that contract is subject to all of the
laws that govern employment contracts. As we will discuss throughout this text, those laws serve
both to preserve an employer’s authority over its employees and to provide a measure of protection for employees, who are presumed to be vulnerable. Independent contractors, on the other
hand, are businesspeople who are presumed to be capable of protecting their own interests.2
Therefore, as depicted in Figure 4.1, our laws confer a wide spectrum of protections on “employees” through both common law and statutory rules and entitlements, whereas independent contractors are largely left to their own devices. Independent contractors enter into commercial
contracts to sell their labour in exchange for revenues and the chance of profit, and the laws that
govern commercial contracts are very different from those that apply to employment contracts.
The distinction between an employee and an independent contractor is also important in
determining liability when workers cause damage to others in the course of their work. Judges
have held employers liable (in tort law) for damages caused by their employees according to a
rule known as vicarious liability, which is considered in Chapter 16. A business would rarely
be held liable “vicariously” for harm caused by an independent contractor.3 Since an employee
is acting on behalf of the employer and under the employer’s control, it is sometimes fair to hold
the employer liable for damage caused by its employees.
independent contractor: A worker who is in business for himself or herself and who, therefore, is not an employee.
employee: A worker who is in a position of subordination to an employer and subject to rules set out in an employment contract.
commercial contract: A contract between two businesses, including a business in the form of an independent contractor.
vicarious liability: A legal rule under which an employer is liable for damage caused to a third party by one or more of its employees.
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Chapter 4 What Is Employment? 55
Independent contractors are also treated differently than employees in tax law. The Income
Tax Act treats independent contractors as businesses and permits them to claim expenses to
reduce their total tax bill, whereas employees are not permitted to deduct expenses.4 The ability
to deduct expenses and thereby reduce their tax burden causes some workers to request to be
treated as an independent contractor even though the law might consider them employees.
What distinguishes employees from independent contractors is autonomy and control.
Employees are workers who sell their autonomy over certain key decisions, such as how and
when to work, in exchange for income (wages, benefits) and some measure of job security.
Employees agree to be subordinate to their employer’s control.5 Independent contractors are
running their own business and retain more autonomy and control over how and when they
perform their work. While this may sound straightforward, in practice it is not always easy to
decide whether an employment relationship exists. In many instances, workers exhibit a mix of
autonomy and subordination. Courts, tribunals, and governments have struggled to create legal
tests to help them distinguish employees from independent contractors. Over time, a third
intermediate category known as a dependent contractor also emerged. As a result, today we can
think of the status of workers along a continuum, as depicted in Figure 4.1.
FIGURE 4.1 Categories of Workers in the Law of Work
INDEPENDENT
CONTRACTORS
DEPENDENT
CONTRACTORS
In business for themselves.
Relationship is considered a
commercial contract;
therefore, the employment
laws considered in this text
and intended to govern the
employment relationship do
not apply.
Independent contractors may
voluntarily opt into some
social insurance schemes,
such as workers’
compensation and
Employment Insurance.
Unlike employees,
independent contractors are
permitted to deduct business
expenses under the Canadian
Income Tax Act.
Employment laws
do not apply
Workers who have more
autonomy than an “employee,”
but who remain economically
dependent on one primary
customer.
■ Common Law Regime
o Entitled to implied
“reasonable notice” of
termination of contract.
■ Regulatory Standards
Regime
o Coverage under some
human rights, workers’
compensation, and
health and safety
legislation.
■ Collective Bargaining
Regime
o Full coverage under
collective bargaining
legislation.
Employment laws
may apply
EMPLOYEES
Subordinate to and
economically dependent
on their employer.
■ Common Law Regime
o Full law of the employment
contract considered in Part II
of this text applies, including
common law implied terms
such as the entitlement to
“reasonable notice of
termination” (Chapter 10).
■ Regulatory Standards Regime
o Full coverage under
employment-related statutes:
• Employment standards.
• Human rights.
• Workers’ compensation.
• Occupational health and safety.
• Pay equity/employment equity.
• Employment Insurance.
■ Collective Bargaining Regime
o Full coverage under collective
bargaining legislation.
Employment laws
apply
dependent contractor: A worker whose status falls in between that of an employee and an independent contractor. This
worker has more autonomy and independence than a typical employee, yet remains economically dependent on one customer
for income and is subject to considerable control at the hands of that customer.
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56 Part I The Law of Work: Themes, Frameworks, and Perspectives
We will consider first how common law judges distinguish between these categories of workers before turning our attention to the regulatory and collective bargaining regimes.
A. The Common Law Tests for Employment Status
Courts have long struggled with the appropriate legal test to distinguish between an employee,
an independent contractor, and a dependent contractor.
1. Distinguishing Between an Employee and an Independent Contractor
The courts’ approach to assessing whether a worker is an employee or an independent contractor has evolved over time. Initially, courts looked primarily at the degree of control exercised
over the worker (the “control test”). The Supreme Court of Canada described the control test as
follows: “the essential criterion of employer-employee relations is the right to give orders and
instructions to the employee regarding the manner in which to carry out his work.”6 However,
the control test was criticized for being overly simplistic and soon gave way to a more nuanced
“fourfold test,” applied in the 1947 case of Montreal v. Montreal Locomotive Works Ltd., which
considered (1) control, (2) ownership of the tools, (3) chance of profit, and (4) risk of loss.7
In some cases, judges also applied what they called the “organization test,” which asked
whether the work in question is “an integral part of the business” of the purported employer or
only peripheral to that business, and whether the worker had been integrated into the business,
such as through regular scheduling and required adherence to company rules and procedures.8
More recently, in the 2001 case of 671122 Ontario Ltd. v. Sagaz Industries Canada Inc., the Supreme Court of Canada encapsulated these various tests into the following new leading statement of the approach judges must take in assessing whether a worker 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. In making this determination, the level of control
the employer has over the worker’s activities will always be a factor. However, other factors to consider include whether the worker provides his or her own equipment, whether the worker hires his
or her own helpers, the degree of financial risk taken by the worker, the degree of responsibility for
investment and management held by the worker, and the worker’s opportunity for profit in the performance of his or her tasks.9 [Emphasis added]
Ultimately, courts look at all of the facts and decide whether the worker looks more like an
employee or more like an entrepreneur who is in business in their own right. We will learn in
Chapter 10 that in the common law regime, employees are entitled to notice of termination to
give them time to prepare for unemployment and look for work. In the three cases considered
below, the workers are claiming that they were “employees” in order to receive damages due to
the alleged employer’s failure to provide them with this contractual entitlement to notice of
termination.
BOX 4.1 » CASE LAW HIGHLIGHT
Employee or Independent Contractor?
Braiden v. La-Z-Boy Canada Limited
2008 ONCA 464
Key Facts: Braiden worked for La-Z-Boy for 22 years as a sales
representative. In 1996, 15 years into this employment, the
employer instructed him to sign a contract that stated he was
an “independent sales and marketing consultant” and not an
“employee” of La-Z-Boy. In 1997, Braiden was instructed by
La-Z-Boy to incorporate a business, and future contracts would
be signed between that company and La-Z-Boy. Braiden
worked mostly from a home office, exclusively for La-Z-Boy,
and he paid his own expenses. He was paid solely on the basis
of commissions. La-Z-Boy set sales targets and controlled
which products Braiden could sell and prohibited him from
assigning his work for La-Z-Boy to other workers. In 2003,
Braiden’s contract was terminated without notice, which
would be unlawful if he were an employee but not if he were
an independent contractor. Braiden sued La-Z-Boy for wrong-
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Chapter 4 What Is Employment? 57
ful dismissal, which (as we will learn in Part II) is a lawsuit that
alleges an employment contract was terminated without reasonable notice having been given.
Issue: Was Braiden working pursuant to an “employment”
contract, and, if so, did the employer violate that contract?
Decision: Yes and yes. The court referred to the Supreme Court
of Canada decision in 671122 Ontario Ltd. v. Sagaz Industries
Canada Inc. for the applicable legal test and concluded as
follows:
In many ways, the question … —whose business is
it?—lies at the heart of the matter. Was the individual carrying on business for him or herself or was
the individual carrying on the business of the organization from which he or she was receiving compen-
sation? In my view, given the findings of the trial
judge, the answer to that question can only be that
Mr. Braiden was carrying on the business of
La-Z-Boy.
Braiden was required to work full time and exclusively for
La-Z-Boy. The clients were assigned to him by La-Z-Boy. His
territory, which products he sold, the quantity and price, and
what sales methods were to be used were determined by LaZ-Boy. Finally, the sales work he performed was crucial to LaZ-Boy’s business. Since Braiden was an employee, he was
working pursuant to an employment contract. Applying the
rules of the common law of employment contracts (which we
will discuss in Part II), Braiden was entitled to “reasonable
notice” from La-Z-Boy of the impending termination of his
contract. In this case, that amounted to 12 months’ notice.
In Braiden, the contract clearly stated that the worker was not an employee, and yet the court
ruled that he was. The courts have said that how a contract describes a worker, while relevant,
does not determine the worker’s status. If it did, then an employer could easily avoid all of its
employment law obligations by simply including a term in every employment contract stating
that the worker is an “independent contractor.”
BOX 4.2 » CASE LAW HIGHLIGHT
Employee or Independent Contractor?
Fisher v. Hirtz
2016 ONSC 4768
wrongfully terminated without reasonable notice. Hirtz argued
that Fisher was an independent contractor.
Facts: Hirtz owned a company called Group Five that supplied
tradespeople to perform work on home renovations. Fisher
was a painter and was assigned work by Group Five. There was
no written contract, and Fisher was free to accept or not accept
jobs. Fisher submitted invoices for hours worked and was paid
biweekly based on $35 per hour, with no statutory deductions
and no benefits from Group Five. Fisher filed her taxes as an
independent contractor, paid for her own insurance, and obtained her own workers’ compensation coverage. Fisher owned
most of the tools needed to complete the painting jobs, but
the paint was supplied by Group Five. She was not restricted
by Group Five from taking other jobs, although in practice that
rarely happened. After about four years, Hirtz and Fisher had
an argument and Fisher was no longer assigned work. Fisher
sued, alleging that she was an employee and she had been
Issue: Is Fisher an employee of Group Five or an independent
contractor?
Decision: Fisher is an independent contractor and therefore
not entitled to reasonable notice of termination. The court
discussed the leading cases, including Sagaz Industries and
Braiden v. La-Z-Boy (see above), and ruled that Fisher more
closely resembled an independent contractor than an employee. She treated herself as an independent contractor in
every way, owned most of the tools, and had freedom whether
to accept jobs offered by Group Five or take other work even
if she rarely did. She was dependent on Group Five only because she chose to be, not because the relationship restrained
her from building a painting business. The court dismissed the
wrongful dismissal lawsuit because Fisher was not an
employee.
Box 4.3 presents a conceptual tool that helps assess how a court is likely to decide a dispute
over whether a worker is an employee or an independent contractor.
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58 Part I The Law of Work: Themes, Frameworks, and Perspectives
BOX 4.3 » Employee or Independent Contractor? The “Scorecard” Method
Courts and administrative tribunals are often asked to decide
whether a worker is an “employee” or an “independent contractor” because different laws and rules apply to employment
contracts than to contracts between two businesses. Although
courts apply a variety of legal tests to arrive at a decision on
the matter, all of these tests attempt to answer one fundamental question: Does the worker look more like an employee or
like an entrepreneur in business for themselves?
One way to assess whether a worker is an employee or an
independent contractor is to use a “scorecard” to track the
FACTORS THAT MAKE THE WORKER LOOK
MORE LIKE AN EMPLOYEE
factors adjudicators consider. Judges and tribunals do not refer
explicitly to a scorecard like this, but they do weigh the following factors. No individual factor is determinative of the
status of the worker. When using this scorecard, consider all
of the facts and ask yourself whether, based on the distribution
of checkmarks in the scorecard, the worker more closely resembles an independent contractor in business for themselves
or an employee dependent on the company for income. See
the Exercise at the end of this chapter for scenarios to test this
approach.
FACTORS THAT MAKE THE WORKER LOOK
MORE LIKE AN INDEPENDENT CONTRACTOR
The company sets working hours and assigns work.
The worker has considerable discretion over when and
how to perform work.
The company owns the tools needed to do the job.
The worker owns the tools needed to do the job.
The company controls how the work is done and closely
supervises the work.
The worker receives little direct supervision by the
company.
The customers/clients are the company’s.
The worker has a variety of customers/clients.
The worker works exclusively for the company.
The worker advertises their services on the open market.
The work is performed at the company’s premises.
The worker has their own office and pays their own
expenses.
The worker has no personal assets invested in the
company.
The worker has invested their own money in the business, so is at risk of loss but could also earn a profit.
The worker must perform assigned tasks themselves.
The worker can hire others to perform work.
Regular employee deductions are made from pay.
The worker issues invoices to the company; no employee
deductions are made.
The company sets the price of the goods or services sold
to customers.
The worker has discretion to set the price of goods sold
or services sold to customers.
The contract defines the worker as an employee.
The contract defines the worker as an independent
contractor.
2. Dependent Contractors in the Common Law Regime
The intermediate category of “dependent contractor” recognizes that a worker might have some
autonomy in the manner in which they perform work, and may have the external appearance of
being an independent contractor, yet still be economically dependent and subordinate. Courts
have ruled that dependent contractors, owing to their subordinate status of economic dependence, should in some respects be treated as if they are employees. Most importantly, a dependent contractor is entitled to “reasonable notice” of termination when their services are
terminated, like an employee.
In assessing whether a worker is a dependent contractor, courts first consider whether the
worker looks more like an employee or a contractor by examining the same factors we just
looked at in Box 4.3. If that analysis leads the court to conclude that the worker more closely
resembles a contractor than an employee, a second step then considers whether the worker is an
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independent or a dependent contractor. In considering this latter question, the courts emphasize the degree to which the worker performed exclusively or almost exclusively for the company.10 The decision in Box 4.4 demonstrates this approach.
BOX 4.4 » CASE LAW HIGHLIGHT
Dependent Contractors in the Common Law
Keenan v. Canac Kitchens Ltd.
2016 ONCA 79
Key Facts: Keenan was hired as an installer of kitchen cabinets
in 1976 and was promoted to foreman in 1983, which required
him to supervise installers at jobs assigned by Canac Kitchens.
In 1987, he was informed by Canac that he would henceforth
perform his work as a contractor rather than an employee of
Canac. Canac would assign jobs to installers and pay Keenan
a fixed amount per job out of which he would pay the installers
and manage the project. Keenan was required to obtain insurance in case of damage to the cabinets. He set up a sole proprietorship called Keenan Cabinetry through which he
provided services to Canac. Payments from Canac did not include any deductions. He worked almost exclusively for Canac,
but as work from Canac declined beginning in 2007, he started
to do some jobs for another cabinetry company, amounting
to about 25 percent of his billings compared to about 75 percent from Canac. In 2009, Canac informed Keenan, who was
63 years old, that his services were no longer needed. Keenan
sued to recover damages for failure by Canac to provide him
with “reasonable notice” of termination of the relationship.
Keenan argued that he was a dependent contractor, while
Canac argued he was an independent contractor.
Issue: Was Keenan a dependent or an independent
contractor?
Decision: Keenan was a dependent contractor. The court of
appeal ruled that in assessing whether a worker is a dependent
contractor, “a finding that the worker was economically dependent on the company due to complete exclusivity or a high
level of exclusivity weighs heavily in favour of the conclusion
that the worker was a dependent contractor.” In assessing
whether the relationship was one of exclusive service or near
exclusivity, the judge must consider the entire history of the
relationship. For almost 30 years, Keenan worked exclusively
for Canac. Only in the final few years did he work for another
company, and that was only because Canac cut back on jobs.
Viewed in its entirety, this was a relationship of economic
dependence and near exclusive service to Canac. Since Keenan
was a dependent contractor, he was entitled to “reasonable
notice,” which the court assessed at a lengthy period of
26 months. Therefore, Canac was ordered to pay 26 months’
wages as damages.
B. Employment Status in the Regulatory and Collective Bargaining Regimes
Expert tribunals tasked with interpreting and enforcing employment-related statutes of the sort
we explore in Part III take a similar approach to the courts in deciding whether a worker is an
employee for the purposes of the statute they are interpreting. The issue of employment status
frequently arises because many statutory entitlements in Canada apply only to employees, as
indicated in Figure 4.1. In a typical case, a worker files a complaint under a statute that provides
entitlements to employees, and the employer responds by arguing that the worker is not an employee and therefore is not covered by the statute. The investigator or tribunal must then decide
if the worker satisfies the definition of “employee” in the statute.
When dealing with statutes, it is important to begin by looking at what the statute says about
the matter. In terms of the distinction between an employee and an independent contractor,
Canadian statutes tend to provide definitions of “employee” that are not particularly helpful. The
Alberta Employment Standards Code definition of “employee” is typical:
“employee” means an individual employed to do work who receives or is entitled to wages and
includes a former employee.11
This definition tells us that an “employee” is a worker who is paid for work they perform, but
it does not explain the difference between an employee and an independent contractor. That
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60 Part I The Law of Work: Themes, Frameworks, and Perspectives
distinction is left mostly to the investigators, tribunals, and courts tasked with enforcing the
legislation. As the case in Box 4.5 demonstrates, those adjudicators approach the question in a
similar manner to the common law courts and apply similar or the same legal tests.
BOX 4.5 » CASE LAW HIGHLIGHT
Employee or Independent Contractor for Purposes of Employment Standards Legislation
Director of Labour Standards v. Acanac Inc.
2013 SKQB 21
Key Facts: Acanac provides a technology platform that delivers voice communication over the Internet. Sabau was retained
in September 2009 as a technical assistant at a rate of $10 per
hour, later raised to $12. His job was to answer calls from
Acanac customers and provide them with technical help
using Acanac’s platform. Sabau was given basic training, and
an Acanac manager could listen in on calls for quality control.
An agreement between the parties identified Sabau as an independent contractor. Sabau logged onto Acanac’s system at
the start of a shift and logged out for breaks and at the end of
his shift. He also kept track of hours worked on a time sheet.
In 2010, the relationship ended and Sabau filed a complaint
under the provincial employment standards legislation claiming $6,625 in unpaid wages. Acanac argued that Sabau was an
independent contractor. An employment standards adjudicator sided with Acanac, but Sabau applied to the court for
judicial review of the decision.
Issue: Was Sabau an employee for the purposes of the Saskatchewan Labour Standards Act or an independent
contractor?
Decision: The court overruled the labour standards adjudicator and found that Sabau was an employee. The judge
referred to the statutory definition of “employee,” which
stated simply that an employee is “a person of any age who
is in receipt of or entitled to any remuneration for labour or
services performed for an employer.” An “employer” was
defined as a person that employs employees and who “either
has control or direction of [the] employees, or is responsible,
directly or indirectly … for the payment of wages to … one
or more employees.” The court then looked to the common
law tests of employment status, including the Supreme
Court of Canada decision in Sagaz Industries (referenced
above).
The fact that Sabau signed a contract stating he was an
independent contractor was relevant, but not determinative.
Acanac had control over Sabau in the sense that it coached
and monitored him and ultimately could terminate the relationship for poor performance. The clients were Acanac’s, so
Sabau had little ability to expand his client base or grow his
income. While Sabau owned the phone and computer needed
to perform the job, the court concluded that “the true tool
here was Acanac’s system. It was Acanac’s system that opened
up Sabau’s opportunity to engage callers.” Considering “the
totality of the relationship,” the court found that Sabau looked
more like an employee than an independent contractor.
Acanac was ordered to pay Sabau $6,625 in wages due under
the Labour Standards Act.
Sometimes governments include definitions that extend coverage under legislation to a wider
segment of workers than might be considered employees if the normal common law tests were
applied. One way to do this is to make the statutes applicable to all contracts and not just
employment contracts. An example can be found in the Ontario Human Rights Code, which
prohibits discrimination in all contracts as well as discrimination in employment.12 This eliminates the need for a worker alleging discrimination at work to first prove they meet the legal
test of employee. Similarly, the federal Human Rights Act defines employment broadly as any
“contractual relationship with an individual for the provision of services personally by the individual.”13 The Ontario Occupational Health and Safety Act defines an employer as any person
who employs workers, including “contractors and subcontractors” to perform work.14 These
definitions encompass any contract for the performance of work by an individual worker under
employment legislation, regardless of whether the worker would be characterized as an employee or an independent contractor applying the usual tests.15
Another way to extend the reach of a statute to cover a broader scope of workers than just
employees is to expressly define “employee” to include dependent contractors. For example,
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Chapter 4 What Is Employment? 61
many of Canada’s collective bargaining statutes simply define employee to include dependent
contractors. This expanded definition ensures that collective bargaining rights are available to
workers such as taxi drivers and truck owner-operators who have greater independence than
a typical employee, yet remain vulnerable and dependent on a single business provider such
that they are in a position of subordination similar to an employee.16 An interesting contemporary question is whether drivers working under new technology platforms such as Uber
and Lyft will be characterized as employees, dependent contractors, or independent contractors when they apply for coverage under employment-related statutes. This issue is discussed in Box 4.6.
BOX 4.6 » TALKING WORK LAW
Are “Gig Workers” Employees?
Are workers engaged in the so-called “gig economy” employees, dependent contractors, or independent contractors?
Many of these workers, such as Uber and Lyft drivers and bike
couriers, for example, work with considerable independence
and own their own “tools” in the form of the cars and bikes
they use to perform their work. However, in other respects,
they resemble employees, or at least dependent contractors.
For example, by registering and logging onto the Uber app,
drivers agree to be bound by rules imposed by Uber in the
same way that taxi drivers have long been bound by rules
imposed by the dispatch companies that refer customers to
them. Canadian labour boards have ruled in the past that traditional taxi drivers that rely on a dispatch service are employees
or dependent contractors and therefore protected by
­employment-related legislation.* Is an Uber driver in a similar
situation?
Professor Eric Tucker of York University has discussed the
issue of control in the gig economy:
To achieve its goals of maintaining standards and
efficiency, Uber exercises considerable control over
its drivers. Although Uber drivers are not required to
book onto the service, once they do, they are governed by Uber’s rules. For example, when a fare is
offered to a driver, the driver has a very limited time
to accept. If the driver does not respond in time, the
fare is offered to another driver. Drivers who decline
too many trips may be forcibly logged off the app for
a period of time. The driver and the vehicle must
meet quality standards set by Uber and are subject
to customer reviews after each trip, with poor reviews potentially resulting in deactivation. These
controls sound remarkably similar to those imposed
by traditional dispatches, which complicates Uber’s
claim that functionally it is merely a rentier capitalist
selling digitialized [sic] dispatch services to drivers.
Moreover, it is precisely these kinds of functional
controls that make both traditional dispatches and
Uber vulnerable to being legally classified the employer of the drivers in its network. Indeed, there is
a rash of claims being brought by Uber drivers seeking employee status, whether for the purposes of
collective representation or to gain the protection of
minimum employment standards, as well as growing
legal academic commentary on whether Uber employees are or should be considered employees.†
Uber drivers in Canada and elsewhere have already begun
to file legal actions asserting they are Uber employees. In 2018,
the English Court of Appeal ruled that Uber drivers are employees because they are subject to considerable control by
Uber once they turn on the Uber app.‡ In 2019, the Ontario
Court of Appeal struck down as illegal a clause in the standard
Uber Eats driver contract requiring that all disputes between
drivers and Uber be dealt with exclusively through private
arbitration held in Amsterdam. That decision cleared the way
for the claim to proceed, which alleges that Uber drivers are
“employees” and entitled to benefits required under the Ontario Employment Standards Act.§
As we have seen, the issue for courts and tribunals in addressing whether “gig” workers are employees or independent
contractors is ultimately whether the workers look more like
dependent employees or entrepreneurs in business for themselves. The answer is far from obvious when applying the usual
legal tests. A more fundamental question, considered below,
is whether it even makes sense to apply the distinction between employee and independent contractor to economically
precarious workers, including so-called gig workers, who are
gig economy: An economic arrangement characterized by an exchange of labour for money that is facilitated by an app or
electronic platform that connects customers to workers.
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62 Part I The Law of Work: Themes, Frameworks, and Perspectives
barely earning a living and who are dependent on technological platforms for their income.
* Retail, Wholesale and Department Store Union v. Diamond
Taxicab Association (Toronto) Limited, 1992 CanLII 6786 (Ont. LRB)
(taxi drivers are “dependent contractors” and covered by labour relations
legislation); J. W. Ferguson Services v. Kolyn, [2005] Ont. LRB Rep. Jan/Feb
97 (a taxi driver is an “employee” under employment standards
legislation); and Castlegar Taxi (1988) Ltd. v. British Columbia (Director of
Employment Standards), 1991 CanLII 8187 (BCSC).
† E. Tucker, “Uber and the Unmaking and Remaking of Taxi Capitalism:
Technology, Law, and Resistance in Historical Perspective” in D. McKee,
F. Makela & T. Scassa, eds, Law and the “Sharing Economy”: Regulating
Online Market Platforms (Ottawa: University of Ottawa Press, 2018) 357
at 379; and M. Cherry, “Beyond Misclassification: The Digital
Transformation of Work” (2016) 37(3) Comp Lab L & Pol’y J 577.
‡ Uber B.V. v. Aslam, [2018] EWCA Civ 2748; and S. Butler, “Uber Loses
Appeal Over Driver Employment Rights,” Guardian (20 December 2018),
online: <https://www.theguardian.com/technology/2018/dec/19/
uber-loses-appeal-over-driver-employment-rights>.
§ Heller v. Uber Technologies Inc., 2019 ONCA 1. See also “Heller v. Uber:
Some Thoughts from Ontario on Uber’s Arbitration Clause,” online, Law
of Work (blog): <http://lawofwork.ca/?p=9626>. The Supreme Court of
Canada heard an appeal from this decision in November 2019, but the
decision had not been issued at the time of writing.
More often, governments narrow the definition of “employee” to exclude from legislative
rules and protections workers who otherwise would be considered employees if the normal
common law tests were applied. As we will learn in Part III of this book, thousands of Canadian
employees are excluded from all or part of employment-related statutes. For various policy
reasons, some of which are far from clear, governments have decided that certain employees
should not be entitled to statutory protections.17 For example, some employment standards
statutes in Canada exclude information technology employees, law articling students, agricultural and construction workers, and workers exercising managerial functions from some or all
of employment standards protections.18
University and college students who are working for companies as part of their educational
program, such as through an academic internship, are also excluded from many statutory protections.19 In recent years, there has been considerable attention directed at companies that have
mischaracterized employees as unpaid interns or trainees to avoid having to comply with
employment protection statutes. As the case in Box 4.7 demonstrates, a worker who is performing training for a business outside of a formal educational program is probably an employee
under employment-related statutes even if the employer claims otherwise.
BOX 4.7 » CASE LAW HIGHLIGHT
Are Trainees and Interns “Employees” Under Employment Standards Legislation?
Pichette v. Lumac Holdings Ltd.
2011 CanLII 80536 (NBLEB)
alleging unpaid wages and vacation pay required by the
statute.
Key Facts: A gas station, Lumac, placed an ad for a cashier,
but by the time Pichette applied the position had been filled.
Pichette told the manager of Lumac (MacKenzie) that she
would “train for nothing” and work night shifts. MacKenzie
agreed to let her train for free, figuring he had nothing
to lose, and if Pichette worked out well he would hire her.
Pichette worked 27 hours over four days and then asked to
be paid for those hours. Lumac management refused because Pichette had volunteered to work for free. Pichette
filed a complaint under the Employment Standards Act (ESA)
Issue: Was Pichette an “employee” for the purposes of the ESA,
or was she an unpaid trainee?
Decision: Pichette was an employee. The tribunal noted that the
statute defined an “employee” as a person “who performs work
for or supplies services to an employer for wages, but does not
include an independent contractor.” It does not exclude workers
who are training, and the ESA prohibits parties from agreeing to
contract out of its requirements. Therefore, even if Pichette
agreed to work for free, that agreement would amount to an
unlawful contracting out of the ESA. The tribunal concluded:
unpaid intern: A term used to describe a person who performs work for a business or receives training by a business but
who is not paid for that work.
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Chapter 4 What Is Employment? 63
regardless of any arrangements between Lumac
and Pichette, and regardless of whether she said
that she would work for free or not, the ESA is clear.
It does not allow for unpaid training time. When an
employee is given specific duties to do, from that
point on he or she becomes an employee on that
date. That is the situation in this case. Regardless of
what was said between Pichette and MacKenzie, it
is the Act that covers the situation in this case. Pichette is entitled to her pay from day one. She must
be paid for the hours that she worked at the minimum wage.
Lumac was ordered to pay $266.76 in wages and accrued
vacation pay.
The practice of using unpaid internships has been defended on the grounds that it enables
young workers to gain much-needed experience and to build career networks that can lead to
good jobs in the future. However, unpaid internships have also been criticized for taking away
paid jobs, for privileging wealthy workers who can afford to work for free, and for perpetuating
the exclusion of young workers from the paid labour market.20
III. Is the Distinction Between Employee and Independent
Contractor Appropriate?
Our discussion so far demonstrates that the distinction between an employee and an independent contractor is crucial in the law of work, but it is often blurred. There is no test that
clearly distinguishes employees from contractors. In recent years there has been a spike in the
number of employees who are being misclassified as independent contractors. This legal ambiguity is problematic because many of Canada’s benefits, protections, and entitlements for workers, both contractual and legislative, are linked to employment.
The significance of the distinction between employees and contractors dates back to the mid20th century, when Canadian governments had in mind a particular form of work known as the
standard employment relationship (SER). The SER existed in the post–World War II period
primarily in large industrial workplaces, applied mostly to men,21 and was characterized by
long-term job security, regular full-time hours, and internal job markets in which workers
expected to rise through the ranks of a single employer over their working lives.22 Canadian
labour policy promoted the ideal of the single-income male breadwinner working in an SER,
earning decent pay with benefits, supported by a female spouse performing unpaid domestic
work in the home, perhaps supplemented with “pin money” through occasional part-time work.
Our work laws reflected this ideal and therefore were designed to protect “employees” at work
and also when they lost their jobs through no fault of their own.
However, the ideal of the SER no longer reflects the reality of the labour market for many
Canadians. Whereas in 1960 more than 70 percent of Canadian families had a male parent
working in full-time employment and a female parent at home raising children, by 2014 only 16
percent of families had a stay-at-home mother, and in 69 percent of families both parents
worked.23 Nearly 40 percent of Canadians now work under work arrangements that differ substantially from the SER, including part-time, seasonal, or temporary jobs as well as “gig” workers
or own account self-employed workers, who might meet the legal definition of an independent
contractor but who are economically precarious and struggle to earn enough to provide for
themselves and their families.24 Often, workers who are legally classified as contractors are more
economically vulnerable than employees who have full-time, good-paying jobs.
standard employment relationship: A model of employment characterized by stable, long-term job security, full-time
hours, decent benefits, and wage rates that rise steadily over time.
own account self-employed workers: Independent contractors who have no employees.
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64 Part I The Law of Work: Themes, Frameworks, and Perspectives
Many of these workers are engaged in precarious work, which may be part time or full time,
but is characterized by few if any employer-provided benefits or a pension plan, low wages, and
less job security and tenure than is anticipated under the SER model.25 The growth in nonstandard work and precarious work over the past few decades has focused attention on the
extent to which our laws have failed to protect some of the most precarious workers.26 When we
view work law and policy through the lens of precarious work, in all its forms, rather than
through the ideal of the SER, this deficiency becomes stark. If a central purpose of work law is
to protect vulnerable workers from the harshness of pure market forces or to inject public policy
concerns into labour markets, for example, then why should it matter whether a worker is formally classified as an employee or a contractor?
Many scholars (and some governments) have proposed that it is time to revisit the law’s reliance on the employee – independent contractor distinction as a gateway to legal rights, entitlements, and responsibilities.27 For example, Professors Fudge, Tucker, and Vosko argue the
following:
A close examination of self-employment in Canada suggests that the time has come to consider dissolving the distinction between employees and the self-employed for the purpose of labour protection and social wage legislation. The majority of the self-employed much more closely resemble
employees than they do entrepreneurs, although for legal purposes many would be classified as independent contractors and, as such, they would be denied the legal protection available to
employees.28
A better approach, according to Fudge, Tucker, and Vosko, is to presume that any worker who
is “dependent on the sale of their capacity to work” be covered by protective labour legislation,
“unless there are compelling public policy reasons for a narrower definition.”29 A similar
approach, used in some countries, is to expand coverage under protective work-related statutes
and social programs to “workers” rather than “employees,” while making clear that a “worker”
includes an employee but also own account self-employed workers, for example.30 This approach
is roughly equivalent to the approach of some Canadian governments that have extended the
definition of employee to include dependent contractors.
IV. Chapter Summary
This chapter introduced the important distinction between “employees” and “independent contractors” in the law of work. The former are governed by a broad range of legal rules targeting
employment contracts and are eligible for many employment-related legal and social benefits.
The latter are in business for themselves and are treated in the law as businesses. Governments
(through legislation) and the courts (in common law decisions) have sometimes extended the
scope of “employees” to include economically dependent contractors who share more in common with employees than they do with independent contractors. Governments have also sometimes used a narrow definition of “employees” in statutes to exclude some types of employees
from statutory provisions. Whether it is good public policy to link access to important protections and social benefits to a technical legal distinction between employee and not-employee is
one of the most important ongoing debates in the law of work.
QUESTIONS AND ISSUES FOR DISCUSSION
1. What is the difference between an employee and an independent contractor? Why is this
distinction important in the law?
precarious work: Work that is defined by characteristics such as job insecurity; short job tenure; low pay; few benefits; low
collective bargaining coverage; and sporadic, limited, or unpredictable work hours.
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Chapter 4 What Is Employment? 65
2. Describe the test the Supreme Court of Canada described in Sagaz Industries Canada to
distinguish between an independent contractor and an employee.
3. What is a dependent contractor, and what is the significance of a court finding that a
worker is one?
4. Provide an example of Canadian legislation in which the definition of “employee” was
refined to exclude a worker who would be considered an employee if the usual common
law test for employment status were applied.
5. What is an unpaid intern? What are some reasons for and against making an unpaid internship unlawful?
6. Explain the difference between the standard employment relationship and precarious
work. Why have some scholars proposed that precarious work is a better concept than
employee versus independent contractor as a means of applying protective work laws?
APPLYING THE LAW
Using the scorecard approach described in Box 4.3, read the
following three scenarios and indicate whether you think the
worker profiled in each would be considered an employee or
an independent contractor. After doing the exercise, read the
decision to see what the court or expert tribunal actually
decided.
Scenario One: The Massage Parlour
“D” performed massages at Sweet City Massage Parlour. She
was one of about 20 massage attendants who performed
massages out of Sweet City’s location. Sweet City provided the
rooms, massage tables, oils and ointments, and linens. D paid
Sweet City $1 per massage to cover the cost of laundering the
linen. D decided what days she worked at Sweet City, although
if she did not report for a shift she had agreed to work she
would be fined by Sweet City between $100 and $200. Customers at Sweet City could select from among the massage
attendants present, but D could refuse any specific customer.
No one from Sweet City supervised how D performed her
massages. No wage was paid to D. Her income consisted of
about 50 percent of the fees paid for the massages she gave,
the other 50 percent going to Sweet City. If no customers
showed up, she would earn nothing that shift. D could perform
massages at her home or in other locations if she wished, and
she could substitute another person to complete a scheduled
shift at Sweet City.
Was D an employee or an independent contractor?
Check your answer by reading Abe Vergara o/a Sweet City
v. MNR, 2004 TCC 263.
Scenario Two: The Massage Therapist
Wang performed massages at the facilities of Active Therapy
Clinic (Clinic) on a full-time basis. He was the only licensed
massage therapist. His contract permitted him to perform
massage services elsewhere, which he did. The contract also
described Wang as an “independent contractor” and not an
employee of the Clinic. Wang was paid an hourly rate while
working at the Clinic. The contract stated that the customers
belonged to the Clinic and not Wang. The Clinic fixed the price
of a massage and supplied Wang with all of the necessary
equipment and supplies to perform the massages. Wang billed
the Clinic every two weeks at the agreed rate for hours worked
at the Clinic, plus an amount for harmonized sales tax. Wang
was paid by the Clinic without any deductions, and he claimed
deductions himself, as a business, when he filed his personal
income taxes.
Was Wang an employee or an independent contractor?
Check your answer by reading Wang v. 1139613 Ontario
Limited (Active Therapy & Sports Clinic), 2013 CanLII 11224 (Ont.
LRB).
Scenario Three: The Forklift Sales Representative
Moseley-Williams worked full time as a salesperson for a forklift
supplier called Hansler. He was expected to work only for
Hansler. He was assigned a jurisdiction in which to sell Hansler
products and was required to meet certain requirements set
down by Hansler while working. However, he performed his
work mostly on his own within those parameters and was
often outside of the office meeting and finding new customers. He used few tools beyond a car and a phone. MoseleyWilliams owned his own car, but Hansler paid him a monthly
car allowance and also paid for a business cellphone. MoseleyWilliams received a commission, the rate of which was set out
in a contract between him and Hansler, and he had not invested his money in Hansler. No statutory deductions were
made from Moseley-Williams’s pay, and his contract described
him as an independent contractor.
Was Moseley-Williams an employee or an independent
contractor?
Check your answer by reading Moseley-Williams v. Hansler
Industries Ltd., 2008 CanLII 57457 (Ont. Sup Ct J).
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66 Part I The Law of Work: Themes, Frameworks, and Perspectives
NOTES AND REFERENCES
1. The story is based on the Decision No. 934/98, 2000
ONWSIAT 3346, aff ’d Blue Line Taxi v. Deek, [2002] OJ
No. 2036 (QL) (Sup Ct J).
2. G. Davidov, “The Reports of My Death Are Greatly Exaggerated: Employee as a Viable (Though Overly-Used) Legal
Concept,” in G. Davidov & B. Langille, eds, Boundaries and
Frontiers of Labour Law (Oxford: Hart, 2006) 133 at
133-34; and B. Langille, “Labour Law’s Back Pages,” in
Davidov & Langille, ibid. at 13.
3. See 671122 Ontario Ltd. v. Sagaz Industries Canada Inc.,
2001 SCC 59; Ivic v. Lakovic, 2017 ONCA 446.
4. See, e.g., Preddie v. The Queen, 2004 TCC 181.
5. B. Langille, “Labour Policy in Canada—New Platform,
New Paradigm” (2002) 28 Canadian Public Policy 133 at
137.
6. Hôpital Notre-Dame de l’Espérance and Théoret v. Laurent,
[1978] 1 SCR 605 at 613.
7. Montreal v. Montreal Locomotive Works Ltd. (1947), 1 DLR
161 (PC) at 169.
8. The organization test was first applied in the British Court
of Appeal case Stevenson Jordan & Harrison, Ltd. v. Macdonald, [1952] 1 TLR 101 at 111, Lord Denning.
9. 671122 Ontario Ltd. v. Sagaz Industries Canada Inc., supra
note 3, at para 47.
10. See also Belton v. Liberty Insurance Co. of Canada (2004),
72 OR (3d) 81 (CA) (sales representatives are “employees”
even though their contract described them as independent
contractors); Kordish v. Innotech Multimedia Corp. (1998),
46 CCEL (2d) 318 (Ont. Ct J (Gen Div)) (a worker can be
an employee even if they created a corporation through
which work is performed); Doyle v. London Life Insurance
Co., (1985), 23 DLR (4th) 443 (BCCA); and Farmers of
North America Incorporated v. Bushell, 2013 SKCA 108.
11. Alberta Employment Standards Code, c. E-9, s. 1(1)
12. See Ontario Human Rights Code, RSO 1990, c. H.19, s. 3.
Contrast McCormick v. Fasken Martineau DuMoulin, 2014
SCC 39 (where a law partner was not considered an employee, and since the BC Human Rights Code applies to
“employment contracts” and not other contracts, age discrimination against a partner is not a violation of the
code).
13. Canadian Human Rights Act, RSC 1985, c. H-6, s. 25.
14. Occupational Health and Safety Act, RSO 1990, c. O.1, s. 1.
15. J. Fudge, E. Tucker & L. Vosko, “Employee or Independent
Contractor? Charting the Legal Significance of the Distinction in Canada” (2003) 10 CLELJ 193 at 211.
16. See McKee v. Reid’s Heritage Homes Ltd., 2009 ONCA 916
at para 34. A leading early decision recognizing the
dependent contractor category was Carter v. Bell & Sons
(Canada) Ltd., 1936 CanLII 75 (Ont. CA). More recent
cases include Fisher v. 6007325 Canada Inc., 2017 ONSC
5943; Marbry et al. v. Avrecan International Inc., 1999
BCCA 172; JKC Enterprises Ltd. v. Woolworth Canada Inc.
(1986), 300 AR 1 (QB); Erb v. Expert Delivery Ltd., 1995
CanLII 8874 (NBQB); TCF Ventures v. The Cambie
Malone’s Corporation, 2017 BCCA 129; Glimhagen v. GWR
Resources, 2017 BCSC 761; Keenan v. Canac Kitchens Ltd.,
2016 ONCA 79; and Khan v. All-Can Express Ltd., 2014
BCSC 1429. For a recent case in which a worker is found
to be an independent contractor, see Thomas v. Vancouver
Free Press Publishing Corp., 2019 BCPC 9.
17. See discussion in L. Vosko, A. Noack & M. Thomas, How
Far Does the Employment Standards Act, 2000 Extend and
What Are the Gaps in Coverage? (Toronto: Ontario Ministry of Labour, 2015).
18. See, e.g., ibid.
19. Canadian Human Rights Act, RSC 1985, c. H-6, s. 25
20. See, e.g., British Columbia Labour Relations Code, RSBC
1996, c. 244, s. 1(1), and Ontario Labour Relations Act, SO
1995, c. 1, Sched. A, which define “employee” to include
“dependent contractors.” For a discussion of the origins of
and justification for the “dependent contractor” definition,
see H. Arthurs, “The Dependent Contractor: A Study of
the Legal Problem of Countervailing Power” (1965) 16:1
UTLJ 89; and M. Bendel, “The Dependent Contractor: An
Unnecessary and Flawed Development in Canadian
Labour Law” (1982), 32 UTLJ 374. See also Quebec’s Act
Respecting Labour Standards, RSQ N-1.1, s. 1, which
defines “employee” as a worker “who is a party to a contract” to perform work for a person when that person controls how the work is to be performed and supplies the
tools and materials needed to perform the work and the
worker keeps as their pay the amount remaining after
deduction of expenses.
21. J. Fudge & L. Vosko, “Gender, Segmentation and the Standard Employment Relationship” (2001) 22 Econ and Indus
Democracy 271.
22. J. Fudge, “The New Workplace: Surveying the Landscape”
(2009) 33 Man LJ 131 at 132; L. Vosko, “Precarious
Employment: Towards an Improved Understanding of
Labour Market Insecurity,” in L. Vosko, ed, Precarious
Employment: Understanding Labour Market Insecurity in
Canada (Montreal and Kingston: McGill-Queen’s University Press, 2006) 6; J. Fudge, “The Future of the Standard
Employment Relationship: Labor Law, New Institutional
Economics and Old Power Resource Theory” (2017) 59:3
J Ind Rel 374; and J. Fudge, E. Tucker & L. Vosko, “Changing Boundaries in Employment: Developing a New Platform for Labour Law” (2003) 10 CLELJ 329 at 354.
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Chapter 4 What Is Employment? 67
23. Statistics Canada, “Employment Patterns of Families with
Children,” online, <https://www150.statcan.gc.ca/n1/pub​/​
75-006-x/2015001/article/14202-eng.htm>. See also B.
Langille, “Take These Chains From My Heart and Set Me
Free: How Labor Law Theory Drives Segmentation of
Workers’ Rights” (2015) 36 Comp Lab L & Pol’y J 257 at
259.
24. Statistics Canada, supra note 23; Vosko, supra note 22; Law
Commission of Ontario (LCO), Vulnerable Workers and
Precarious Work (2013), online: <http://
www.lco-cdo.org/en/vulnerable-workers​-final-reportsectionII>; and K. Stone, From Widgets to Digits: Employment Regulation for the Changing Workplace (Cambridge:
Cambridge University Press, 2004).
25. Statistics Canada, supra note 23. See also Langille, supra
note 23.
26. Fudge, “The New Workplace,” supra note 22 at 139. See
also L. Vosko, N. Zukewich & C. Copeland, “Precarious
Jobs: A New Typology of Employment” (October 2003) 4
Perspectives 16, 19; and LCO, supra note 24, s. IV, <http://​
www.lco-cdo.org/en/vulnerable-workers-interim-report​
-sectionIV>.
27. See literature at supra note 22. There is a huge literature
exploring the challenge posed to employment and labour
law by changes to the nature of work and the shift away
from the standard employment model. Some additional examples include Stone, supra note 24; J. Fudge, E. Tucker &
L. Vosko, “Employee or Independent Contractor? Charting
the Legal Significance of the Distinction in Canada” (2003)
10 CLELJ 193; H. Collins, “Independent Contractors and
the Challenge of Vertical Disintegration of Employment
Protection Laws” (1990) 10 Oxford J Legal Stud 331;
S. Deakin, “The Comparative Evolution of the Employment
Relationship,” in G. Davidov & B. Langille, eds, Boundaries
and Frontiers of Labour Law (Oxford: Oxford University
Press, 2006) 89; M. Finkin, “The Death and Transfiguration
of Labor Law” (2011-2012) 33 Comp Lab L & Pol’y J 171; J.
Fudge, “After Industrial Citizenship: Market Citizenship or
Citizenship at Work?” (2005) 60 Indus Rel 1; and G.
Davidov, “Who Is a Worker?” (2005), 34 Indus LJ 57.
28. Fudge, Tucker & Vosko, supra note 27 at 229.
29. Ibid. at 230.
30. See discussion in Davidov, supra note 27 at 57.
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Selected Cases: Part I
Cases with boldface page numbers appear as Case Law Highlights.
671122 Ontario Ltd. v. Sagaz Industries Canada Inc., 2001 SCC 59 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56, 57, 66
Abe Vergara o/a Sweet City v. MNR, 2004 TCC 263 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
Belton v. Liberty Insurance Co. of Canada, 2004 CanLII 6668 (Ont. CA) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
Braiden v. La-Z-Boy Canada Limited, 2008 ONCA 464 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56, 57
Carter v. Bell & Sons (Canada) Ltd., 1936 CanLII 75 (Ont. CA) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
Christie v. The York Corporation, [1940] SCR 139 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Director of Labour Standards v. Acanac Inc., 2013 SKQB 21 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
Doyle v. London Life Insurance Co., 1985 CanLII 301 (BC CA) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
Erb v. Expert Delivery Ltd., 1995 CanLII 8874 (NB QB) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
Farmers of North America Incorporated v. Bushell, 2013 SKCA 108 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
Fisher v. Hirtz, 2016 ONSC 4768 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57, 66
Heller v. Uber Technologies Inc., 2019 ONCA 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
Hôpital Notre-Dame de l’Espérance and Théoret v. Laurent, [1978] 1 SCR 605 . . . . . . . . . . . . . . . . . . . . . . . . . 66
JKC Enterprises Ltd. v. Woolworth Canada Inc. (1986), 300 AR 1 (QB) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
Keenan v. Canac Kitchens Ltd., 2016 ONCA 79 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59, 66
Kordish v. Innotech Multimedia Corp. (1998), 46 CCEL (2d) 318 (Ont. Ct J (Gen Div)) . . . . . . . . . . . . . . . . . 66
Machtinger v. HOJ Industries, [1992] 1 SCR 986 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9, 15
Marbry et al. v. Avrecan International Inc., 1999 BCCA 172 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
McKee v. Reid’s Heritage Homes Ltd., 2009 ONCA 916 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
Montreal v. Montreal Locomotive Works Ltd., 1946 CanLII 353 (UK JCPC) . . . . . . . . . . . . . . . . . . . . . . . . 56, 66
Moseley-Williams v. Hansler Industries Ltd., 2008 CanLII 57457 (Ont. Sup Ct J) . . . . . . . . . . . . . . . . . . . . . . . 65
Pichette v. Lumac Holdings Ltd., 2011 CanLII 80536 (NB LEB) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
Seneca College v. Bhadauria, [1981] 2 SCR 181 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Slaight Communications Inc. v. Davidson, [1989] 1 SCR 1038 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Stevenson Jordan & Harrison, Ltd. v. Macdonald, [1952] 1 TLR 101 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
Vriend v. Alberta, [1998] 1 SCR 493 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29, 33
Wang v. 1139613 Ontario Limited (Active Therapy & Sports Clinic), 2013 CanLII 11224 (Ont. LRB) . . . . . . 65
69
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Part II
The Common Law Regime
Formation and Requirements of an Employment Contract
CHAPTER 5
A Brief History of the Common Law Model of Employment
CHAPTER 6
The Job Recruitment and Hiring Process
CHAPTER 7
The Requirements to Create and Modify an Employment Contract
The Employment Contract
CHAPTER 8
Expressed Terms of Employment Contracts
CHAPTER 9
Implied and Ancillary Employment Contract Terms
The End of an Employment Contract
CHAPTER 10 Termination by an Employer with “Reasonable Notice”
CHAPTER 11 Termination by “Frustration”
CHAPTER 12 Summary Dismissal: Termination for Cause Without Notice
CHAPTER 13 “You Forced Me to Quit!”: The Special Case of Constructive Dismissal
CHAPTER 14 Damages in Wrongful Dismissal Lawsuits
CHAPTER 15 “I Quit!”: Termination of the Employment Contract by the Employee
Tort Law and Work
CHAPTER 16 Tort Law and the Employment Relationship
Selected Cases: Part II
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CHAPTER 5
A Brief History of the Common
Law Model of Employment
*
LEARNING OBJECTIVES
CHAPTER OUTLINE
After reading this chapter, students will be able to:
I. Introduction 73
II. Master and Servant Law 73
A. English Master and Servant Law 74
B. Master and Servant Law in the Canadian Colonies 76
III. The Common Law of Employment Contracts in the 19th Century 78
A. The Common Law of Employment Contracts in 19th-Century England 78
B. The Common Law of Employment Contracts in 19th-Century Canada 80
C. Key Developments in the 20th Century 81
IV. Chapter Summary 81
Questions and Issues for Discussion 82
Notes and References 82
• Explain the characteristics of master and servant law.
• Describe the timeline of the emergence of the common law
model of employment in England and Canada.
• Explain the similarities and differences between master and
servant law and the common law of employment contracts.
• Describe the main features of the common law of
employment contracts in the 19th century.
I. Introduction
As we saw in the overview of the law of work in Chapter 1, the Canadian common law of
employment contracts originates from 19th-century England. Prior to Canada’s Confederation
in 1867, English statutory and common law applied in the new British colonies through a process known as reception. As a result of reception, Canadian courts applied English case law to
decide the claims before them. However, much remains to be known about the history of the
common law of employment in Canada, because it has only been viewed as a legal field in
Canada since the 1960s, when common law employment contract claims first became the source
of frequent litigation. This chapter broadly examines the historical evolution of the contract of
employment, starting with its English origins.
II. Master and Servant Law
The English courts first issued common law decisions regarding the employment contract in the
early 19th century, at a time when master and servant law was the primary legal mechanism for
common law: A system of judge-made rules originating in England around the 12th century, and inherited by Canada as a British colony, that uses a precedent-based approach to case law. Earlier decisions dealing with similar facts or legal issues guide later
decisions in an attempt to create legal predictability. However, common law rules can and often do evolve as social values change.
reception: When the British Empire established a colony, it often passed a statute that specified that the law of the colony
was the statutory and common law in force on that date in England.
*This chapter was written by Claire Mummé, Faculty of Law, University of Windsor.
73
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74 Part II The Common Law Regime
regulating the terms of employment. Master and servant law was a body of statutory and related
case law first enacted in the 14th century in the wake of the Black Death (the plague pandemic
of 1348 to 1350, in which one-third of England’s population died). This law determined the
rights and obligations of workers and employers based on their social status. Master and servant
law was exported across the British Empire and was applied, in different forms, across the British
North American colonies.1
When the courts first began to issue common law employment contract decisions in the early
19th century, Lord Ellenborough, chief justice of the King’s Bench at the time, suggested that the
common law’s purpose was to regulate the relationships between parties equal in rank and
status. In other words, the common law was to regulate the work of higher status workers. By
contrast, as scholar Daphne Simon argues, the laws of master and servant were “meant to secure
the disciplining and subordination of the wage-earner.”2 But rather than simply apply general
contract principles to the employment contract, in which both parties were viewed as equal in
law, the courts continued to apply existing doctrines and concepts from master and servant law,
such that its central subordinating features were absorbed into the common law framework.3
Therefore, to fully understand the evolution of the common law of employment contracts, a
grasp of master and servant law is required.
A. English Master and Servant Law
As noted above, legislation regulating waged work was first enacted in England in the 14th
century to organize work relations in the aftermath of the Black Death. So as to maintain the
pre-plague social and economic power dynamic between the classes, the English government
(the “Crown”) enacted the Ordinance of Labourers in 1349 and the Statute of Labourers in 1351,
creating a system of compulsory labour that was designed to regulate labour mobility and wage
rates, and which was enforced through penal sanctions.4 In the 16th century, the various
existing statutes were amended and recodified in the Elizabethan Statute of Artificers, during
which time a wage recovery mechanism was created.5
The laws of master and servant were characterized by certain key features that were deployed
in different socio-political contexts and toward different ends at different times, but which
remained more or less in place until the late 19th century.6 The statutes regulated competition
between employers by requiring justices of the peace (JPs) to set wage rates for different professions, instead of leaving it to the parties. It was illegal for one employer to hire away another’s
worker or to offer higher than legislated wages. Employment contracts were generally presumed
to last for one year (annual hire/general hire contract) unless the parties expressly agreed to
another length of time.7 Workers owed their employers a broad duty of obedience, the violation
of which provided cause for dismissal or even imprisonment, as did a variety of other types of
master and servant law: A body of legislation and related case law that regulated the work of servants, agricultural workers,
and skilled craft workers in England between the 14th and 19th centuries, and which was primarily interpreted and applied by
local justices of the peace and magistrates.
penal sanctions: State punishment imposed through criminal law, usually referring to incarceration.
wage recovery mechanism: A legal provision allowing workers to claim unpaid wages before a justice of the peace or
magistrate.
justice of the peace: In the 19th century, a local nobleman or gentleman appointed to represent the Crown in a particular
locality and empowered by statutes to resolve different types of legal matters; also known as a magistrate.
annual hire/general hire contract: If the parties did not expressly agree on the length of their employment contract, it was
presumed in law to last for one year. The annual hire contract was initially born out of agricultural work. It allowed workers to be
employed between the agricultural seasons, and ensured that workers would not leave their employers right before a harvest.
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Chapter 5 A Brief History of the Common Law Model of Employment 75
misbehaviour. Workers could not leave their employment within the contract’s term except with
their employer’s permission and faced fines or jail time for doing so.8 Workers could not, however, be fired within the contract’s term unless their employer established cause for dismissal
before a JP (or magistrate).9 Workers were regulated by criminal law for contract breaches,
while employers were subject only to civil fines. By the Elizabethan era (1558 – 1603), the statutes
also specified that workers could not leave the parish of their birth without their masters’ permission, unless they secured an annual hire contract in another parish. Workers, therefore,
could not freely move around the country looking for work.10 Some examples of the ways in
which workers’ low legal status affected the laws of master and servant are shown in Box 5.1.
BOX 5.1 » CASE LAW HIGHLIGHT
Master and Servant Cases in England
The laws of master and servant that pre-dated the common
law model of employment treated the worker as subordinate
to their master, unable to quit during the life of a contract or
to disobey orders without sanction. This environment is reflected in the following summaries of court decisions and
rulings by JPs from the early 19th century.
R v. Barton-Upon-Irwell
[1814] 2 M. & S. 328
The worker (“servant”) was hired for a period of a year (an annual hire contract). After two months, he was convicted and
sentenced to one month’s imprisonment for disobeying the
master. After nine days, the master requested that he be released and returned to work. On his return, the servant was
again charged with disobedience and insubordination and
was sentenced to one month’s hard labour. He appealed this
decision, arguing that the first conviction brought the employment contract to an end. The court disagreed. Lord Ellenborough CJ decided “[i]t would be clearly against the policy of the
law if the servant by his own act of delinquency should have
the power of dissolving the contract. … The imprisonment of
the servant was so far from being a cessation of the service,
that perhaps his labour might have been required of him by
his master even while he was in prison. … The master indeed
had an election to avoid the contract, but he made his election
to continue the pauper in his service, which it was in his power
to do.” Until this ruling was overturned in 1857, conviction for
misbehaviour or desertion did not bring the employment
contract to an end, but rather the worker had to return to work
after imprisonment and could be recommitted again and
again until the contract’s term came to an end.*
The Case of James Totterdale
Mr. Totterdale left his home and family in Liverpool in search
of work. He was hired by Mr. Perry in Wolverhampton. A short
time after starting work, he received a letter from his wife
advising him that one of his children was seriously ill and had
only a short time to live, so he should return home immediately. He did so without stopping to get permission from his
master. He reached Liverpool just in time to see his child die,
and just as another of his children and his wife were stricken
by the same illness. Mr. Perry had Mr. Totterdale arrested in
Liverpool and returned to Wolverhampton. He was taken before the courts under charges of desertion. At the employer’s
urging, the magistrate ordered that Mr. Totterdale return to his
job and pay the expenses of his capture and removal, between
3 or 4 pounds.†
Spain v. Arnott
[1817] 171 ER 638
The servant worked on a farm. Just as he was about to sit down
for dinner, his master ordered him to take some horses to a
nearby town. The servant replied that he would go after he
had eaten, but the master insisted that he go immediately.
When he refused, he was dismissed. The servant brought a
claim for wages owing, arguing that he had been dismissed
without cause within the contract’s annual term. The Statute
of Artificers had been interpreted to that point as requiring
employers to establish cause in front of a justice of the peace
before a servant could be dismissed during the contract’s term.
However, Lord Ellenborough cast that step aside and ruled that
masters could dismiss an employee for cause without a JP’s
permission and concluded the following:
magistrate: See justice of the peace.
parish: A unit of local government coinciding (in England) with the Church of England’s geographical areas.
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76 Part II The Common Law Regime
If the plaintiff persisted in refusing to obey his
master’s orders, he is warranted in turning him
away. He might have obtained relief by applying to
a magistrate [similar to a justice of the peace]; but
he was not bound to pursue that course. … There
is no contract between the parties, except that
which the law makes for them, and it may be hard
upon the servant, but it would be exceedingly inconvenient if the servant were to be permitted to
set himself up to control his master in his domestic
regulations, such as the time of dinner. After a refusal on the part of the servant to perform his work,
the master is not bound to keep him on as a bur-
thensome and useless servant to the end of the
year. In the present instance it might be very inconvenient for the master to change the hour of
dinner; the question really comes to this, whether
the master or the servant is to have the superior
authority.
* In Ex Parte William Baker, [1857] 26 Law J Rep MC 193, the Exchequer
Court changed course and held that a conviction dissolved the
employment contract.
† From the testimony of George Odger, Secretary of the London Trades,
Report from the Select Committee and Royal Commission on Master and
Servant Law (House of Commons, 1865 – 1875) (Shannon, Ireland: Irish
University Press, 1970) at question 1827.
Starting in the mid-19th century,11 as England was in the midst of the massive technological
and socio-economic transformations of the Industrial Revolution, trade union activists mobilized against the penal sanctions of the laws of master and servant. Employers had begun to use
those laws as strikebreaking tools, prosecuting striking workers for misconduct, desertion, or
unpermitted temporary absences. In response, unions argued that the law needed to treat the
parties equally instead of imposing jail time on workers and only fines on employers. They
objected to workers being arrested and hauled before JPs as criminals and argued for treating
work regulation according to a contractual model, which provided at least formal legal equality
between the parties.12 In 1875, the penal provisions of the laws of master and servant were finally
repealed in England. Thereafter, individual statutes were enacted to regulate particular types of
skilled and industrial work, while higher status workers, as well as domestic servants and clerks,
were regulated by an emerging common law of employment contracts.13
B. Master and Servant Law in the Canadian Colonies
As the British Crown began claiming North American lands in what is now known as Canada,
the new colonies received existing English statutory and common law. Each of the Canadian
colonies, therefore, theoretically received the laws of master and servant that were then in force
in England. However, due to different reception dates and different political cultures and economic conditions, each colony’s laws of master and servant differed significantly from one another, and sometimes from the laws of England.14 Nova Scotia, for instance, enacted its own
local statute very early, in 1765, which was primarily used by employers to prosecute merchant
seamen in the fisheries industry.15
The Hudson’s Bay Company (HBC), which governed Rupert’s Land (western Canada) under
Royal Charter, provided its workers with a detailed employment contract, the violation of which
gave rise to financial rather than penal sanctions.16 HBC contracts incorporated many of the
requirements of master and servant law. However, they also included other requirements specific to location and trade; for example, trading post workers were prohibited from having
relationships with members of the Indigenous population or trade on their own account.
In Quebec (then known as Canada East), master and servant law was set and regulated by
municipalities under delegated authority from the Legislative Assembly of Lower Canada after
deadlocked disagreement about whether it constituted private law or criminal law.17
Ontario (Canada West) enacted its own Master and Servant Act in 1847.18 That act was similar in many respects to the English statutes in force in the mid-19th century: employees who
refused to work, quit within the contract’s term, were disobedient, or injured their employers’
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Chapter 5 A Brief History of the Common Law Model of Employment 77
property were subject to fines or up to one month’s imprisonment. As distinct from the English
statutes, however, the Ontario master and servant statute did not regulate apprenticeships;
instead, it broadly applied to servants and labourers rather than to specific occupations.
(See Box 5.2.)
The Ontario act also created a wage recovery mechanism that workers could use to make
claims before JPs for unpaid wages. Paul Craven (York University) reports a steady stream of
cases under the act between 1847 and 1877, the majority of which were wage claims brought by
workers, but by the early 1870s employers were increasingly using the statute as a strikebreaking
tool, deployed against collective action and trade union activity.19 As in England, Canadian
trade unions organized against penal sanctions for breach of the employment contract, and in
1877 the criminal law sanctions for desertion and disobedience were repealed, while malicious
and wilful contract breaches remained a criminal offence.20
In general, the Canadian experience with master and servant law was determined by its
reception date and by the particularities of the local economy and labour market. Regardless of
how much this law was used, the difference in rights and obligations it specified for employers
and workers was symbolic and ideological: master and servant law represented a colonial policy
of protecting class distinctions.21
BOX 5.2 » TALKING WORK LAW
The Application of Master and Servant Law in Mid-19th Century Canada
Most master and servant cases were not recorded in law books
unless they were appealed to the courts. It is, therefore, difficult to research this law. Nonetheless, legal historians have
located the records of specific magistrates, JPs, and police
courts, which provide some details. Professor Paul Craven reports the following cases decided by the Galt Police Court
magistracy after the enactment of Ontario’s master and servant statute in 1847, demonstrating the extent
to which the threat of prison and fines was
used to keep workers in line:
A girl who left her service after a dispute
over the peeling of potatoes, in the course
of which her employer, as the latter testified, “gave her a little push,” was given a
month to pay a $1 fine and $2.35 costs,
with the alternative of two days in jail, and
was told to work out her time or forfeit her
wages. … A boy who was hired to work
on a farm for six months and took his
commitment literally, so that he served
from 22 April to 22 October, and not to
the end of the calendar month, was ordered to return to work and make up the
nine days or spend twenty days in jail. A
man who grew impatient with his employer’s lethargic search for a replacement
was offered the alternatives of returning to work for
three days, forfeiting a week’s wages, paying a $7
fine, or spending ten days in jail.*
* P. Craven, “The Law of Master and Servant in Mid-Nineteenth Century
Ontario,” in D.H. Flaherty, ed, Essays in the History of Canadian Law, vol 1
(Toronto: University of Toronto Press, 1981) at 203.
This illustration of a mid-19th-century shoe factory in Nova Scotia shows both the
highly labour-intensive nature of work at the time and the appearance of new
industrial technology.
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78 Part II The Common Law Regime
III. The Common Law of Employment Contracts in the 19th Century
Labour lawyers and historians have traditionally believed that the common law of employment
emerged in 19th-century England, just as modern principles of contract law were developing.
As it emerged, the common law is said to have displaced master and servant law, which was then
in the process of becoming obsolete.22 The contractualization of employment was thought to be
part of what historian Henry Sumner Maine called the “movement from Status to Contract.”23
Newer studies, however, demonstrate that master and servant law continued to be actively used
as a disciplinary tool against workers until 1875.24 In Canada, existing research on the history
of the common law of employment prior to the 1960s focuses on Ontario, and for this reason
the next few pages will focus on its trajectory in that province.25 Whether the law’s development
was similar in other Canadian provinces is an open question.
A. The Common Law of Employment Contracts in 19th-Century England
The English common law of employment contracts emerged around the turn of the 19th century, as England entered its second Industrial Revolution. In the midst of this transformation,
the courts of England in the early 1800s held that domestic and menial servants, as well as
higher status workers, were excluded from regulation by the laws of master and servant.26 Those
excluded workers now brought their employment-related claims to the common law courts.
The early cases before the common law courts dealt with a wide range of workers, from professional employees such as bankers and engineers to lower status workers such as domestic
servants and clerks. In these formative days of the common law model, the courts continued to
apply subordinating concepts and principles from the laws of master and servant. A pure application of classical contract law would have required the parties to bargain for an employer’s right
of authority and control, which had been given effect under master and servant law through
workers’ duty of obedience.27 As scholar Alan Fox explained:
[C]ontract as the pure doctrine defined it could not be seen by the property-owning classes as an
adequate foundation for governing the employment relationship. Their needs were met by infusing
the employment contract with the traditional law of master and servant, thereby granting them a
legal basis for the prerogative they demanded. What resulted was a form of contract almost as far
removed from the pure doctrinal form as the status relationship which had preceded it.28
The common law of employment contracts, therefore, was born and has remained a hybrid
body of law, mixing contractual notions of legal equality with principles of status and subordination, setting it apart from the general law of contract. We will see examples of the distinct status
of employment contract law as we work our way through Part II.
Most significantly, despite theoretical legal equality between contracting parties at common
law, the courts continued to assert that workers had a legal obligation to obey their employers,
and that employers could dismiss workers who did not do so for cause. The courts treated
employers as holding a natural right to control and direct the employment relationship and only
rarely sought to anchor such a right in contract law. The courts also used class to distinguish the
rights and obligations of different kinds of workers. Higher status workers were presumed to
work under annual hire contracts, unless the contract indicated otherwise, and could not be
dismissed within the annual term without cause. In contrast, some lower status workers, such
as domestic servants and clerks, could be terminated without notice or cause where an industry
custom of dismissal by notice existed.29
This class-based distinction was reinforced in the mid-19th century. Under the laws of master
and servant, a worker dismissed without cause during the contract’s term was only entitled to
unpaid wages already accrued. However, in the 1853 case of Emmens v. Elderton, the British
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Chapter 5 A Brief History of the Common Law Model of Employment 79
House of Lords held that the employment contract consisted not only of an exchange of wages
for services but also of an ongoing promise to retain an employee in employment for the contract’s duration.30 Dismissal without cause during the contract’s term, therefore, was a breach of
the employer’s promise to retain the worker in employment and entitled the worker to damages
not only for wages already earned but also, potentially, for wages that would have been earned
had the contract run its full term.31 This case was the beginning of the breach of contract action
we today call wrongful dismissal, which is considered in Chapter 14. However, in the formative
years of the employment contract model, the right to recover damages for prospective lost wages
was only available to workers with fixed-term or annual-term employment contracts (typically
higher status workers) and not for employees working under contracts that could be terminated
upon notice.
Employees governed by an annual-term contract could only be terminated for cause. The
courts were asked to consider what constituted cause as the contract model developed. In the
1829 case of Callo v. Brouncker an English court held that disobedience, gross moral misconduct, habitual neglect in business, or conduct calculated to seriously injure the master’s business
constituted cause for dismissal at common law.32 Disobedience was the overarching concept
anchoring the types of cause that permitted dismissal. The notion of disobedience was broad:
workers were required to obey all lawful orders, full stop. The case of Turner v. Mason, described
in Box 5.3, demonstrates the ways in which the duty of obedience created a power differential
between the parties in an employment contract.
BOX 5.3 » CASE LAW HIGHLIGHT
The Implied Duty of Obedience
Turner v. Mason
[1845] 153 ER 411
Key Facts: A domestic servant requested that she be allowed
to visit her dying mother overnight. Her employer refused, but
she went anyhow, staying away until the next day. She was
then fired without the standard industry custom of one
month’s notice. She brought a claim to the courts seeking
damages based on a failure to provide notice. The employer
argued that there was cause for dismissal, which relieved it of
the obligation to provide notice.
Issue: Was the employee terminated for cause such that there
was no contractual requirement to provide notice of
termination?
Decision: Yes. The court ruled that employees are required to
obey all lawful orders of the employer. In this case, the order
not to leave the house was lawful, and yet the employee left
anyhow. This was a clear breach of the contract by the employee, justifying termination without notice. The court was
unmoved by the reason the employee left:
I do not think it would be sufficient to justify her in
disobedience to his order; there is not any imperative obligation on a daughter to visit her mother
under such circumstances, although it may be unkind and uncharitable not to permit her.
The court’s role was not to assess the fairness or kindness
of the employer’s actions but to enforce the contract as they
understood it. The court did recognize that exceptional circumstances might arise in which an employee would be justified in ignoring an employer’s orders:
There may, undoubtedly, be cases justifying a wilful
disobedience of such an order; as where the servant
apprehends danger to her life, or violence to her
person, from the master; or where, from an infectious disorder raging in the house, she must go out
for the preservation of her life. But the general rule
is obedience, and wilful disobedience is a sufficient
ground of dismissal.
wrongful dismissal: A type of lawsuit by an employee against a former employer alleging that the employer terminated their
contract without complying with the implied term in the contract requiring “reasonable notice.”
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80 Part II The Common Law Regime
Toward the end of the 19th century, the duty of obedience was narrowed in scope for higher
status workers, as the courts began to suggest that such workers were only required to obey
orders that related directly to the nature of their job. So, for instance, a lace maker could not be
fired for disobeying an order to do menial work.33 Although the ability to dismiss for cause is
now treated as an implied contract term of the employment contract, as we discuss in Chapter
12, in the 19th century it was rarely described as such. Instead, the duty of obedience and the
employer’s right to dismiss for cause were treated as existing by the natural order of things, as
necessary legal incidents that arose from the nature of the employment relationship. According
to treatise writer Charles Smith, the grounds of cause arose from duties that were “implied by
law from the relationship of master and servant.”34
B. The Common Law of Employment Contracts in 19th-Century Canada
As mentioned, very little research exists about the history of the common law of employment in
provinces other than Ontario prior to the 1960s. The Ontario judiciary applied English precedents to decide the cases before them and very rarely cited cases from the other Canadian colonies. Therefore, no national or Canadian colonial body of employment law existed in the 19th
century. And whereas 19th-century England was in the middle of the massive socio-economic
transformation of the Industrial Revolution, Ontario at that time was still primarily a subsistence agricultural economy, with the beginnings of industrial production emerging only at
mid-century. Not surprisingly, therefore, the common law of employment played a small role
during this period in Ontario. Cases that were reported mostly concerned the work of middleclass and professional workers, almost exclusively male.35
The types of arguments made in early employment contract cases were demonstrative of the
nature of the Ontario labour market at the time. Until the 1840s, Ontario’s economy was overwhelmingly agricultural. People did not primarily engage in waged labour but instead worked
on their own farms, undertaking short-term waged labour only for the time necessary to accumulate enough money to purchase land or needed implements. Many tasks were accomplished by family members, by the pooling of labour by neighbours, or by payment in kind and
sharecropping rather than through hiring waged labourers.36 Domestic service, for instance, was
primarily undertaken by family members rather than by employees.37 Under English legal precedent, however, work among family members was presumed not to form an enforceable
employment contract, and so most of these claims were defeated.38
Starting in the late 19th century, workers invoked the common law of employment contracts
more frequently, and it was during the early 20th century that the courts of Ontario began to
give it modern shape. In the late 19th century, Ontario entered into its second Industrial Revolution, ushering in an era of unprecedented economic growth.39 Between the 1890s and 1930s, the
province saw significant growth in industrial manufacturing, the emergence of new manufacturing and transportation technologies, new scientific management theories to systematize
industrial production, incorporation as a growing form of business organization, and a significant influx of American direct investment. American direct investment became a major political
and economic force in the province, as branches of American companies opened across southern Ontario. The focus of production shifted from family-based agricultural work to waged
labour in the manufacturing, resource, transportation, and financial sectors. The changing
structures of economic activity, production, and the labour process over the early 20th century
provoked the growth of a waged professional class of white-collar workers in Ontario, and these
implied contract term: A default contract term invented by common law judges and read into an employment contract when
the written terms of the contract (if any) do not address the specific issue addressed by the implied term.
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Chapter 5 A Brief History of the Common Law Model of Employment 81
workers brought their employment claims to the common law courts with a new degree of
frequency.
A decisive legal moment took place in 1898, when the Supreme Court of Canada followed
the English and American courts and opted to abandon the legal presumption of annual hire
contracts. In England the presumption was successively weakened after the mid-19th century.
In Ontario it seems to have had almost no practical significance and was infrequently litigated.
Nonetheless in Bain v. Anderson & Co. the Supreme Court of Canada held that when the parties
have not expressly agreed to the length of an employment contract, it would no longer be presumed to last for a year, but would rather be determined based on the intentions of the parties
and the facts at hand. In England, the courts had reached a similar conclusion in 1891, holding
that there was no presumption of annual employment. Rather, where no express duration was
chosen by the parties, there was a presumption of indefinite duration employment, and such
employees could be fired without cause as long as they were provided reasonable notice of
dismissal.40
The presumption of annual hire had been conceptually significant to the development of the
early common law of employment contracts in a few ways. The length of employment contracts
had served to determine the permissible timing of dismissal and the potential damages for
wrongful dismissal. Once the presumption was abandoned, the courts needed a new way to
determine when employers could dismiss their employees, and thus expanded the concept of
dismissal by industry custom to a broad right to dismissal with reasonable notice, now applicable to all employees.
C. Key Developments in the 20th Century
During the early 20th century, the courts expanded the number of implied duties workers owed
to their employers, adding the duties of fidelity, good faith, and confidentiality to the preexisting duty of obedience (see Chapter 9). At the same time, they drew on contractual principles to limit the rights employers could exercise over workers’ time and efforts, looking to
industry custom and the intentions of the parties to allow workers some times of the day outside
of their employers’ control. In Ontario, at least, the courts continued to strictly apply English
precedent and rarely cited cases from the other Canadian provinces.41 The development of the
common law of employment contracts seemed to stall over the mid-20th century, however,
owing to the massive unemployment of the Great Depression followed by the full employment
levels of World War II (discussed in Chapter 4). It would not be until the 1950s and 1960s, as
the standard employment relationship of the Fordist era came to prominence, that the courts
would once again actively develop the common law of employment contracts. They now did so
within a national framework, no longer reliant on English law, with active conversation among
the courts of the Canadian provinces. From the 1960s onward, Canadian courts developed the
common law of the employment contract that will be described in the next dozen chapters.
IV. Chapter Summary
This chapter examined the historical origins of the common law model of employment regulation. As was discussed, from its early years in the 19th century, the common law regulation of
work has stood apart from the general law of contract. It is distinct not only in terms of its constandard employment relationship: A model of employment characterized by stable, long-term job security, full-time
hours, decent benefits, and wage rates that rise steadily over time.
Fordism: Refers to the era between the 1920s and 1960s, characterized by industrial mass production by semi-skilled unionized male workers with relatively secure jobs within large, vertically integrated companies. The term is derived from American
industrialist and automaker Henry Ford.
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82 Part II The Common Law Regime
tinued conceptual ties to master and servant law but also because it continues to grapple with
the issues posed by the fundamental power asymmetries between employers and employees, as
we shall see in the coming chapters.
QUESTIONS AND ISSUES FOR DISCUSSION
1. What aspects of master and servant law justify its classification as a legal regime premised
on the subordination of workers?
2. In what ways does the common law of employment contracts resemble and differ from
master and servant law?
3. Why did the common law of employment contracts first emerge in England when it did?
4. Was the employment relationship heavily regulated in Ontario in the 19th century?
5. When and why did common law employment contract cases arise with regularity in
Ontario?
NOTES AND REFERENCES
1. See D. Hay & P. Craven, eds, Masters, Servants and Magistrates in Britain and Empire, 1562 – 1955 (Chapel Hill, NC:
University of North Carolina Press, 2004) for more details
on the use of master and servant law across the British
Empire.
2. Lord Ellenborough in R v. Heywood, [1813] 105 ER 233;
and D. Simon, “Master and Servant,” in J. Saville, ed, Democracy and the Labour Movement (London: Lawrence and
Wishart, 1954) at 198.
3. Modern contract law, or “free will contract,” was itself in
the process of development in the early 19th century. See
P. Atiyah, The Rise and Fall of Freedom of Contract
(Oxford: Clarendon Press, 1979) at xi (repr. in paperback
with corrections, 1985).
4. Ordinance of Labourers, 23 Edw. III; and Statute of Labourers, 25 Edw. III, stat. 2. The enormous number of deaths
resulting from the Black Death resulted in severe labour
shortages across the country, allowing workers to force
employer competition with regard to wages. L.R. Poos,
“The Social Context of Statute of Labourers Enforcement”
(1983) 1:1 LHR 27; and R. Palmer, English Law in the Age
of the Black Death, 1348 – 1381: A Transformation of Governance and Law (Chapel Hill, NC: University of North
Carolina Press, 1993).
5. Statute of Artificers, 5 Eliz. c. 4. The requirements of the
Statute of Artificers were thereafter interwoven with the
laws of settlement and the poor laws in the 17th century.
Together these statutes created a comprehensive system for
regulating the labour market. See, generally, S. Deakin & F.
Wilkinson, The Law of the Labour Market (Oxford: Oxford
University Press, 2005) at chapter 3; and N. Landau, “Who
Was Subjected to the Laws of Settlement? Procedure
Under the Settlement Laws in 18th Century England”
(1995) 43:2 Agric Hist Rev 139.
6. The early master and servant statutes applied to the waged
work of agricultural workers, household servants, and
labourers, and to the employment relationships between
apprentices, journeymen, and master craftsmen. Until the
1830s, they also imposed requirements for entry into the
skilled trades. For a discussion on the changing uses of
the master and servant statutes over time, see R. Steinfeld,
The Invention of Free Labor: The Employment Relation in
English and American Law and Culture, 1350 – 1870
(Chapel Hill, NC: University of North Carolina Press,
1991); R. Steinfeld, Coercion, Contract and Free Labor in
the Nineteenth Century (New York: Cambridge University
Press, 2001); D. Hay, “England, 1562 – 1875: The Law and
Its Uses,” in Hay & Craven, supra note 1; and Deakin &
Wilkinson, supra note 5.
7. An annual hire contract renewed itself automatically
unless either party provided three months’ notice before
the end of its term, operating similarly to a modern residential tenancy.
8. Usually one month’s imprisonment, although some of the
newer statutes of the 18th and the 19th centuries increased
the length to three months. See Hay, supra note 6 at 106.
9. In Spain v. Arnott, [1817] 171 ER 638, Lord Ellenborough
ruled that employers could now dismiss for cause on their
own authority, rather than have to establish cause before a
magistrate or JP. See Box 5.1.
10. As of 1691, however, servants employed under an annual
hire contract were permitted to stay beyond the year in
their adopted parish and could not be removed from the
parish even if they became destitute. The question of
whether a servant was employed under an annual hire contract thus became a central point for litigation between parishes trying to minimize their relief obligations. See Deakin
& Wilkinson, supra note 5; and Landau, supra note 5.
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Chapter 5 A Brief History of the Common Law Model of Employment 83
11. Certain key features of the law of master and servant had
been abandoned by the early 19th century, as were the
requirements of the laws of settlement. The wage-fixing
provisions and the requirements for apprenticeship and
entry into the skilled trades were repealed in the 1810s.
But even with these changes, prosecutions continued to
grow throughout the century, and the penalties under the
statutes were increasingly punitive. As Hay, supra note 6,
indicates, prosecution and imprisonment were in fact in
steady ascent right up until the date of the penal sanctions’
repeal in 1875.
12. In testimony before the House of Commons, W.P. Roberts,
“the miner’s lawyer,” was asked if he “would treat labour as
you would treat any other commodity,” “merely as an
article to buy and sell.” He replied “yes.” Testimony of W.P.
Roberts, reported in the Royal Commission on Labour
Report, 1865 – 1875 at questions 2299-30.
13. Deakin & Wilkinson, supra note 5.
14. Nova Scotia was asserted to be an English colony in 1714,
and it was thereafter subdivided to include the colonies of
Prince Edward Island in 1769 and New Brunswick in 1784.
The colony of New France was ceded to the British at the
end of the Seven Years War of 1756 – 63. The colony was
divided into Upper and Lower Canada in 1791. Ontario, or
Upper Canada, was “created” as a British colony when it
was separated off from Quebec to accommodate British
Loyalists fleeing the United States in the late 18th century.
Western Canada, then called “Rupert’s Land,” included
what is now Alberta, Manitoba, parts of Saskatchewan, the
Northwest Territories, Nunavut, and parts of northern
Quebec and Ontario. Exclusive control over Rupert’s Land
was given to the Hudson’s Bay Company (HBC) in 1670
through a Royal Charter from the English Crown. HBC
held control over the area until 1869, when the company
surrendered its charter. The area was dominated by the fur
trade and heavily settled by Indigenous and Métis communities. With its Charter, HBC was given the power to
enact its own laws and regulations with regard to the company’s governance and for the advancement of trade, as
long as those laws and regulations were not repugnant to
the laws of England. HBC, therefore, created its own
private system of government. See P. Craven, “Canada
1670 – 1935, Symbolic and Instrumental Enforcement in
Loyalist North America,” in Hay & Craven, supra note 1.
The regulation of paid employment in the fisheries in early
Newfoundland was tied directly to the relationship
between British merchants, resident planters, and servants
through the mechanisms of Palliser’s Act. As Cadigan
argues, the act had a significant effect on the shape of
Newfoundland’s settlement and economy. See S. Cadigan,
“Merchant Capital, the State, and Labour in a British
Colony: Servant-Master Relations and Capital Accumulation in Newfoundland’s Northeast-Coast Fishery,
1775 – 1799” (1991) J Can Hist A 17. For details on the
process of reception across the British Empire, see J.E.
Côté, “The Reception of English Law” (1977) 15 Alta L
Rev 29.
15. According to Paul Craven, it initially applied to indentured
servants and to servants hired for six months or more and
was then expanded to include servants hired by the
month. Similar statutes were then passed in Prince Edward
Island and New Brunswick. The statutes of the Atlantic
colonies did not initially impose jail time for breach of
contract; instead, they ordered the parties to perform their
contracts (“specific performance”) or pay fines for desertion or disobedience. But magistrates appeared to have
assumed the power to imprison absconding workers in
Nova Scotia (even without explicit statutory authorization)
and New Brunswick (before its statute was amended to
include this power in 1826). See Craven, supra note 14 at
180-86.
16. The history of Rupert’s Land and the HBC Charter is a fascinating aspect of Canadian history. In particular, the fact
that the company operated as a government, a business,
and an employer created a unique employment law
regime. For a detailed history of employment under the
HBC, see E.I. Burley, Servants of the Honourable Company:
Work, Discipline, and Conflict in the Hudson’s Bay
Company, 1770 – 1879 (Toronto: Oxford University Press,
1997).
17. The Quebec Act of 1774 attempted to resolve the confusion
created after the British colonial government introduced
English common law principles and procedures into the
administration of the colony. The act reverted to the use of
French civil law for resolving private law disputes, while
criminal law would be based on the English common law.
The difficulty was that, because master and servant law
used criminal penal sanctions to remedy breach of contract, it did not fall clearly within either civil or criminal
law. Rather than expressly deciding how to classify
employment regulation, the Legislative Assembly of Lower
Canada delegated employment regulation to the colony’s
three municipal districts. See Craven, supra note 14 at
186-89; Ian Pilarczyk, “‘Too Well Used by His Master’: Judicial Enforcement of Servants’ Rights in Montreal,
1830 – 1845” (2001) 46 McGill LJ 491; Ian Pilarczyk, “The
Law of Servants and the Servants of Law: Enforcing
Masters’ Rights in Montreal, 1830 – 1845” (2001) 46 McGill
LJ 779.
18. An Act to Regulate the Duties Between Master and Servant,
and for Other Purposes Therein Mentioned, S. Prov. Can.
1847, c. 23.
19. Craven, supra note 14 at 200-1.
20. Ibid. at 202-3.
21. Ibid.
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84 Part II The Common Law Regime
22. See Simon, supra note 2, for an example of this argument.
23. H.S. Maine, Ancient Law (London: John Murray, 1920) at
173. Maine famously argued that modern societies were
ones that had moved from a state “in which all the relations of persons are summed up in the relations of Family”
toward “a phase of social order in which all these relations
arise from the free agreement of individuals.”
24. See, e.g., Deakin & Wilkinson, supra note 5.
25. See C. Mummé, That Indispensable Figment of the Legal
Imagination: The Contract of Employment at Common Law
in Ontario, 1890s – 1979 (PhD thesis, York University,
2013).
26. Lowther v. Earl of Radnor, [1806] 8 East, 113; and Branwell
v. Penneck, [1827] 7 B and C 536, 108 Eng. Rep. 823.
27. A. Fox, Beyond Contract: Work, Power and Trust Relations
(London: Faber and Faber, 1974) at 183; and P. Selznick,
Law, Society and Industrial Justice (New York: Russell Sage
Foundation, 1969) at 132.
28. Fox, supra note 27.
29. See S. Jacoby, “The Duration of Indefinite Employment
Contracts in the United States and England: An Historical
Analysis” (1982) 5 Comp Lab LJ 85 at 95-103; J. Bird, The
Laws Respecting Masters and Servants, Articled Clerks,
Apprentices, Manufacturers, Labourers and Journeymen,
3rd ed (London: W. Clarke, 1899) at 2. Bird explains that
this practice arose because in large urban areas it was difficult to “learn the character of a servant.” Where no judicial notice of custom existed, the parties could introduce
evidence to establish it. In such cases the courts examined
evidence of usual practice in the industry, but also used
the one month’s notice for domestic servants as a yardstick, comparing the relative social status of the industry to
domestic service to determine the likelihood of the suggested custom. In Beeston v. Collyer, [1827] 172 ER 276,
the court rejected the argument of an industry custom of
one month’s notice for dismissal for a clerk to an army
agent: “A man in this class is not likely to be able to get a
situation so soon as a butler or a footman can,” said Best
CJ. He added, on appeal, that “it would be, indeed, extraordinary, if a party, in his station of life, could be turned
off at a month’s notice, like a cook or scullion.” By the mid19th century, the English courts held that there was an
industry custom for clerks to be dismissed with three
months’ notice. See also Metzner v. Bolton, [1854] 156 ER
221; and Fairman v. Oakford, [1860] 157 ER 1334.
30. Emmens v. Elderton, [1853] 13 CB 495 (HL).
31. Ibid. at 506.
32. Callo v. Brouncker, [1829] 2 Man. and Ry. 502, (1831),
4 C. and P. 518.
33. Price v. Mouat, [1861] 11 CB (NS) 508. See also Deakin &
Wilkinson, supra note 5 at 14-15, 80.
34. C. Smith, A Treatise on the Law of Master and Servant
(Philadelphia: T. & J.W. Johnson, 1852) at 68-69.
35. These cases stand in contrast to English cases during
the time, which saw claims from lower status workers
and female domestic servants throughout the 19th
century.
36. J. Webber, “Labour and the Law,” in P. Craven, ed, Labouring Lives: Work and Workers in 19th Century Ontario
(Toronto: University of Toronto Press/Ontario Historical
Studies Series, 1995) at 118-23.
37. The work of domestic servants was important to the development of the common law of employment contracts
in England. The issue of industry custom of dismissal by
notice first emerged from their work. But because family
members in Ontario did most 19th-century domestic
work, and because the local master and servant statute
covered domestic servants, they did not figure in the case
law of 19th-century Ontario. This meant, for instance,
that the body of law that developed in England around
the industry custom of dismissal by notice for domestic
servants was not actively applied in Ontario in the 19th
century.
38. Other than wrongful dismissal and family work cases,
cases also arose concerning the formalities required of municipal corporations in contracting with workers as towns
and cities grew and municipalities were incorporated.
Some cases concerned the proper interpretation of written
terms of an employment contract. Such claims were almost
invariably brought by workers, and, as Craven, supra note
14, indicates, they were relatively strictly interpreted to
defeat workers’ interests. As noted, there were also a
handful of claims for wrongful dismissal and claims for
wages. Although such claims were few, when they arose
the courts faithfully applied English precedent to decide
them. Finally, in addition to claims among family
members for wages, there were seduction cases, in which
employers or parents sued men who had impregnated
their daughters/servants out of wedlock for lost wages. See,
e.g., Cromie v. Skene, [1869] 19 UCCP 328.
39. For general statistics and analysis of the transformation
and rapid growth of the Canadian economy over the early
20th century, see O.J. Firestone, Canada’s Economic Development, 1867 – 1953 (London: Bowes and Bowes, 1958);
R.C. Brown & R. Cook, Canada 1896 – 1921: A Nation
Transformed (Toronto: McClelland & Stewart, 1991) at
chapter 5; C. Heron, “The Second Industrial Revolution in
Canada, 1890 – 1930,” in D.R. Hopkin & G.S. Kealey, eds,
Class, Community and the Labour Movement (Wales:
Llafur/CCLH, 1989) at 50-53; G. Stapells, “The Recent
Consolidation Movement in Canadian Industry” (master’s
thesis, University of Toronto, 1922); C. Heron & B.D.
Palmer, “Through the Prism of the Strike: Industrial Conflict in Southern Ontario, 1901 – 1914” (1977) 8:4 Can Hist
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Chapter 5 A Brief History of the Common Law Model of Employment 85
Rev 423; P. Craven, An Impartial Umpire: Industrial Relations and the Canadian State (Toronto: University of
Toronto Press, 1980) at 90-110; G. Lowe, “The Administrative Revolution: The Growth of Clerical Occupations” (dissertation, University of Toronto, 1979); and G. Bertram,
“Economic Growth in Canadian Industry, 1870 – 1915: The
Staple Model and the Take-Off Hypothesis” (1963) 29:2
Can J Econ & Pol Sci 159 at 176-77, 182.
40. See Lowe v. Walter, [1892] 8 TLR 358; and Bain v.
Anderson & Co. (1898), 28 SCR 481.
41. For greater detail on the changing content of the common
law of employment contracts in the early 20th century, see
C. Mummé, “From Control Through Command to the
Control of Discretion: Labour Time, Labour Property and
the Tools of Managerial Control in Early 20th-Century
Ontario” (2016) 45:1 Indus LJ.
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CHAPTER 6
The Job Recruitment and
Hiring Process
LEARNING OBJECTIVES
CHAPTER OUTLINE
After reading this chapter, students will be able to:
I. Introduction 87
II. The Common Law and Discrimination in Job Recruitment and Hiring 88
III. Common Law Torts That Apply to Job Recruitment and Hiring 88
A. Tort of Deceit or Fraudulent Misrepresentation by a Prospective
Employer 89
B. Tort of Negligent Misrepresentation by a Prospective Employer 90
C. Fraudulent or Negligent Misrepresentation by a Job Applicant 91
IV. Chapter Summary 93
Questions and Issues for Discussion 93
Exercise 94
Notes and References 94
• Explain the ways in which common law courts regulate the
job recruitment process and hiring decision.
• Understand why complaints alleging discrimination
in hiring decisions are dealt with under the
regulatory standards regime and not the common law
regime.
• Define the torts of deceit and negligent misrepresentation.
• Define the contract law concept of fraudulent
misrepresentation.
I. Introduction
The employment relationship, like a marriage, begins with a courting process. Employers
search for workers by using word of mouth or by placing “want ads” in media where job seekers
look for work. Prospective employees view and respond to these ads, or make cold calls, distributing their résumés as widely as possible. When the two sides meet, they discuss what the
position entails and whether the job seeker is a suitable candidate. If the two sides like each
other, an offer of employment might be made. This is known as the job recruitment and hiring
process.
Most of the law that affects this process is found in the regulatory regime (Part III), and not
the common law regime. It is easy to see why: the job recruitment process occurs before the creation of an employment contract, and most of the common law regime deals with the rules of
contracts. The common law regime is guided by the beacon of freedom of contract: employers
and employees will enter into a contractual relationship only when both sides believe that doing
so will make them better off. The role of judges in the recruitment process has primarily been
focused on policing dishonesty and misrepresentations made during the courting process, to
encourage a process in which the parties make informed and rational decisions about whether
to enter into employment contracts.
The virtual absence of common law rules governing the job recruitment and hiring process
eventually worried Canadian governments. In a system driven by the concept of freedom of
contract, employers would be free to hire (or to not hire) anyone they liked. Therefore, an early
output of the common law regime was blatantly discriminatory hiring decisions. Job ads
would openly announce “Men Only” or “Whites Only.” All of this was (and still is) perfectly
lawful within the common law regime. As we noted in Chapter 2, as social values evolve, so
too does the law of work. By the 1950s, governments had begun to enact various statutes that
87
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88 Part II The Common Law Regime
regulated and prohibited some forms of discrimination in hiring. These laws restricted
employers’ freedom of contract. For example, employers could no longer refuse to hire an employee because of their skin colour or gender. More recently, governments in many countries
have debated whether to restrict employers from searching job applicant’s social media
accounts and relying on information found there in their decision making. These statutory
rules regulating the job recruitment and hiring process will be explored in greater detail in
Part III. In this chapter, we consider the more limited role of common law courts in policing
this process.
II. The Common Law and Discrimination in Job Recruitment
and Hiring
Let’s begin by reviewing the origins of the common law’s silence on discrimination in the job
recruitment and hiring process. We need to travel back to a hot summer evening in Montreal,
1936, before there were anti-discrimination statutes. Fred Christie went to a bar at the old Montreal Forum arena. He ordered a beer but was refused because the bar had a rule against serving
“negroes.” Christie sued the bar, claiming $200 for the humiliation he suffered. His case made it
to the Supreme Court of Canada, where he lost. The Supreme Court ruled that the general principle of the law is “complete freedom of commerce,” the only restrictions being the existence of
a statute restricting this freedom or “the adoption of a rule contrary to good morals or public
order.”1 In 1940, the Supreme Court did not believe a rule prohibiting “negroes” from buying a
beer fell into either of those two restrictions. In fact, the court chastised Christie for making a
scene and calling the police, “which was entirely unwarranted by the circumstances,” since the
refusal had been done “politely.”2
This case is called Christie v. The York Corporation, and it is an important part of Canadian
legal history.3 It stands for the proposition that, in the common law regime, freedom of contract
reigns supreme. Judges did not want to get involved in telling people (and businesses) who they
can and cannot contract with, even if that meant turning a blind eye to blatant racism and discrimination. Christie was not an employment case, but it had important implications for the law
of work, since it applied to all of contract law. It indicated that under the common law, employers
have no restrictions in terms of who they hire. Years later, this legal principle was tested again
in Seneca College v. Bhadauria (see Box 6.1).
The court found that Bhadauria could file a Human Rights Code complaint, but that she could
not sue Seneca College in a common law action for discrimination. No such common law action
exists. Therefore, the result of the rulings in Christie v. The York Corporation and Seneca College
v. Bhadauria is that discrimination issues in hiring decisions must be dealt with under the second regime of work law: regulatory standards.4 We will explore how human rights statutes regulate recruitment and hiring in Chapters 21 – 23.
III. Common Law Torts That Apply to Job Recruitment and Hiring
As mentioned earlier, judges play a limited role in policing the job recruitment process. This role
is mostly concerned with regulating the control and truthfulness of information passing
between prospective employers and employees. The theory is that freedom of contract depends
on the parties having sufficient truthful information to assess whether a proposed deal is
rational. If one party misleads the other about key issues relating to the proposed contractual
relationship, then we could no longer assume that the contract is rational and the result of a fair
meeting of the minds. In the pursuit of informed contracting parties, common law judges have
deployed both tort and contract law to promote a truthful flow of information during the job
recruitment and hiring processes.
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Chapter 6 The Job Recruitment and Hiring Process 89
BOX 6.1 » CASE LAW HIGHLIGHT
The Common Law and Discrimination in Hiring
Seneca College v. Bhadauria
[1981] 2 SCR 181
Key Facts: Bhadauria, a woman of East Indian origin, applied
ten times for a job as an instructor at Seneca College. Although
well qualified for the position, she was never once invited to
an interview. She filed a lawsuit in the common law courts,
alleging that she had been discriminated against on the basis
of her race. She argued that the court should recognize a new
tort prohibiting discrimination in hiring decisions, or a right to
bring a lawsuit in court to enforce the Human Rights Code,
which by this time prohibited discrimination in hiring based
on race. The Ontario Court of Appeal agreed with Bhadauria
and recognized a new tort, but Seneca College appealed to
the Supreme Court of Canada.
Issue: Does Canadian common law recognize a tort of discrimination that prohibits an employer from discriminating
against job applicants based on race?
Decision: No. The Supreme Court of Canada noted that the
courts had not previously recognized a tort of discrimination:
[A] refusal to enter into contract relations or perhaps, more accurately, a refusal even to consider the
prospect of such relations has not been recognized
at common law as giving rise to any liability in tort.
The court then considered whether to uphold the court of
appeal’s decision to invent a new common law legal action
based on discriminatory hiring:
The view taken by the Ontario Court of Appeal 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 the [Human Rights
Code]. …
[N]ot only does the Code foreclose any civil action based directly upon a breach thereof but it also
excludes any common law action based on an invocation of the public policy expressed 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.
A. Tort of Deceit or Fraudulent Misrepresentation by a Prospective Employer
Employers cannot deliberately mislead or lie to a prospective employee to induce that person to
accept an employment offer. This behaviour is caught by the tort of deceit, as well as a contract
law action called fraudulent misrepresentation.5 Both legal actions can arise when an employer’s representative tells a job applicant something that they know is untrue, and the job applicant,
relying on that statement, ends up suffering a loss.6 If the fraudulent statement induces the
person to enter into an employment contract, that person has the option to rescind the contract
(treat the contract as void) and to recover damages suffered that can be attributed to the misrepresentation. There are few decisions in which Canadian employers have been found to have
committed a tort of deceit or fraudulent misrepresentation during the job recruitment process.
The low number of decisions might indicate that employers rarely lie to applicants or, perhaps,
that it is difficult for a prospective employee to prove deceit and fraud.
deceit: A tort in which party A makes a false statement with the intention of misleading party B; party B relies on the false
statement and, as a result, party B suffers a loss. Damages can be recovered for that loss.
fraudulent misrepresentation: A common law action based in contract law in which party A knowingly makes a false
statement with the intention to mislead party B, and that statement induces party B to enter into a contract. In that case, party
B may be able to rescind the contract and seek damages for any loss suffered.
rescind: To set aside a contract and put the party back into their pre-contract position.
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90 Part II The Common Law Regime
B. Tort of Negligent Misrepresentation by a Prospective Employer
The tort of negligent misrepresentation is also concerned with employers who mislead prospective job applicants, but it does not require a deliberate intention to misinform. As a result,
it is more common than deceit and fraud.7 Like most torts applied in Canada, negligent misrepresentation has its roots in the British common law. The origin of this tort is the 1963 case
Hedley Byrne & Co. v. Heller & Partners.8 Although it is not an employment case, the tort recognized in it has since been applied to cases where employers have made promises to prospective employees.9
In Hedley Byrne, a bank (Heller & Partners) informed a business (Hedley Byrne) that company X was a good credit risk, when in fact company X was on very shaky financial ground.
Relying on the bank’s assurance, Hedley Byrne agreed to perform a large order for company X.
However, company X subsequently went out of business without paying Hedley Byrne its fee. In
an attempt to recover its losses, Hedley Byrne sued the bank. It argued that it was wrong for
someone possessing special knowledge to make untrue statements without taking reasonable
care to ensure the accuracy of those statements. The court agreed and invented a new tort known
as negligent misrepresentation. The court stated the following about that tort:
I consider that it follows and that it should now be regarded as settled that if someone possessed of
a special skill undertakes, quite irrespective of contract, to apply that skill for the assistance of another
person who relies upon such skill, a duty of care will arise.10
That reference to a duty of care is crucial to understanding torts involving negligence, as we
will discuss further in Chapter 16. Only people who owe a duty of care to others can commit the
tort of negligent misrepresentation. The courts have held that employers and employees owe a
duty of care to one another during the job recruitment process. The leading Canadian employment case applying the tort of negligent misrepresentation to the job recruitment process is the
Supreme Court of Canada decision in Queen v. Cognos Inc. (see Box 6.2).
BOX 6.2 » CASE LAW HIGHLIGHT
Negligent Misrepresentation in the Job Recruitment Process
Queen v. Cognos Inc.
[1993] 1 SCR 87
mitted the tort of negligent misrepresentation during the
interview process.
Key Facts: Queen had a job in Calgary, but was restless. He
applied for a job with Cognos Inc., a firm located in Ottawa. At
the interview, Cognos’s representative, Johnston, explained
that the job would involve working on a new project, but did
not disclose to Queen that the project was conditional on
funding, which was not guaranteed. Queen was offered the
job. He quit his job in Calgary and moved his family to Ottawa.
Queen signed an employment contract with Cognos, which
permitted Cognos to dismiss him for any reason with one
month’s notice. When the funding for the project did not come
through, Queen was dismissed, about 17 months after he was
hired. Queen sued Cognos, alleging that Johnston had com-
Issues: Does the tort of negligent misrepresentation apply to
the pre-employment recruitment process? If so, did Cognos
commit this tort by failing to make clear that the job in question was contingent on funding yet to be confirmed?
Decision: Yes and yes. The Supreme Court of Canada confirmed that negligent misrepresentation was now firmly entrenched in Canadian tort law:
Though a relatively recent feature of the common
law, the tort of negligent misrepresentation relied
on and … first recognized by the House of Lords in
negligent misrepresentation: A tort in which party A, owing a duty of care, makes an untrue statement to party B without
sufficient care as to the statement’s accuracy, which party B then relies upon and suffers loss as a result.
duty of care: A special close relationship between two parties that creates an obligation in tort law to take reasonable steps
to avoid harming the other party.
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Chapter 6 The Job Recruitment and Hiring Process 91
Hedley Byrne … is now an established principle of
Canadian tort law.
The court then listed the elements that must be proven to
make out a case for negligent misrepresentation:
(1) [T]here 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 said misrepresentation; (4) the representee must have relied,
in a reasonable manner, on said negligent misrepresentation; and (5) the reliance must have been detrimental to the representee in the sense that damages
resulted.
The Supreme Court found that the employer’s representative had made inaccurate statements to Queen and that Queen
had relied on those statements to his detriment. Therefore,
elements 2, 4, and 5 were satisfied. Element 1 was also satisfied
because a representative of an employer, who the job applicant would reasonably believe is speaking on behalf of the
employer, is in a “special relationship” vis-à-vis the applicant
such that a duty of care arises.
The more difficult question in Queen v. Cognos Inc. was
whether the statements made to Queen were “negligently
made” (element 3). The employer representative (Johnston)
testified that he believed the project would go ahead, so that
when he told this to Queen, he was speaking honestly. However, the court noted that Johnston also knew that the project
still required certain funding approvals that were not guaranteed, and he did not pass this important information on to
Queen. The Supreme Court indicated that this omission
amounted to negligent misrepresentation. The court stated
the following about the test for negligent misrepresentation
by a prospective employer:
A duty of care 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 and honest in his or her representations.
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. …
Under the standard of care described above,
Mr. Johnston failed to exercise such reasonable care
as the circumstances required him to in making the
representations he did during the interview. Particularly, he should not have led the appellant to believe
that the Multiview project … was a reality when, in
fact, he knew very well that the most important factor to the existence of the project, as he was describing it, was financial support by the respondent.
Since Johnston kept important information to himself, allowing Queen to form the opinion that the job was secure, he
acted negligently. It was not a defence that Johnston believed
the project would be affirmed. Since all of the elements of the
tort had been made out, Queen won his tort lawsuit.
The remedial goal in tort law is to put the victim back into
the position they would have been in had the tort not occurred. What likely would have occurred had Cognos not made
the negligent misrepresentation? Well, Queen likely would
not have immediately quit his job in Calgary, which paid
him $50,000 per year. So the court ordered Cognos to pay
Queen $50,000 in lost income, representing one year’s lost
salary. Also, Queen would not have had to buy a house in
­Ottawa and then sell it at a loss of about $12,000 when he was
unexpectedly dismissed. The court ordered Cognos to reimburse Queen for that loss, as well as pay him an additional
$5,000 for “emotional stress.”
Queen won his case because the employer failed to disclose important information that was
known at the time of the job interview—that funding for the position was not guaranteed. It is
important to remember that not every statement made by an employer during the job recruitment process that turns out to be false will amount to a negligent misrepresentation.11 For example, if the statements involve guesses or predictions about future events that may or may not
happen, rather than alleged statements of existing fact, a court is unlikely to find a negligent
misrepresentation. The courts assume that employees are capable of understanding that sometimes predictions turn out to be wrong.12
C. Fraudulent or Negligent Misrepresentation by a Job Applicant
So far, we have considered how judges have applied torts to regulate misrepresentations by employers during the recruitment process. What about job applicants? Sometimes, people looking for work
embellish their credentials to make themselves more attractive to courting ­employers or to obtain
better contract terms. This too can constitute fraudulent misrepresentation, which occurs if the job
applicant knowingly makes a false representation that induces, or causes, the employer to hire the
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92 Part II The Common Law Regime
applicant. If the employer learns of the dishonesty during the recruitment process,
then usually a legal issue will not arise. The employer will not hire the person. But
what happens if the employer does not learn of the employee’s misrepresentation
until after they have already hired the employee and entered into an employment
contract? This is the scenario that most often arises in the case law dealing with
misrepresentation by employees during the job recruitment process.
In practice, the issue of dishonesty by an employee during the job recruitment
process usually arises in a wrongful dismissal lawsuit brought by a dismissed
employee.13 A wrongful dismissal lawsuit, as we will learn in Chapter 10, alleges
that the employer terminated its contract with the employee without giving the
amount of notice required by the employment contract. Sometimes, an employer
will terminate an employee’s contract when the employer learns that the employee
lied during the job recruitment process (see Box 6.3). In a subsequent wrongful
dismissal case, the employer would argue that the misrepresentation made by the
employee during the job recruitment process voided the requirement for the employer to give notice before terminating the employee’s contract.14
We see in the Clark decision that dishonesty by a job applicant about an important fact during the recruitment process can ultimately lead an employee’s contract to be terminated, forfeiting any contractual entitlements. Note that this rule is
applicable even if the employee has worked for the employer for some time before
the employer learns of the dishonesty. The rationale for this rule is that mutual trust
is a fundamental requirement of the employment relationship, and dishonesty of a
serious nature by an employee can irreparably destroy the employer’s trust.15 The
same rationale explains some other common law rules we will meet later in this part
of the text, including judges’ reluctance to reinstate employees to their former jobs,
regardless of how inappropriately the employer had behaved in dismissing the employee. In the Clark decision, the employee’s misrepresentations had induced the employer to enter
into the contract and influenced the terms of the contract. However, sometimes a job applicant’s
dishonesty may not have any influence on the employer at all. The employer would have hired the
person even if the employee had not made the false claim. What happens then?
BOX 6.3 » CASE LAW HIGHLIGHT
Fraudulent Misrepresentation by a Job Applicant
Clark v. Coopers & Lybrand Consulting Group
2002 CanLII 45050 (Ont. CA)
contract without providing notice of termination and without
paying the bonus?
Key Facts: Clark lied about his academic qualifications in an
application for a job at Coopers & Lybrand Consulting. Impressed with his credentials, Coopers & Lybrand offered him a
high-level management job. However, a couple of years after
Clark started, the employer learned of the deception and terminated Clark’s contract with no notice. Clark sued for the
three months’ wages in lieu of notice of termination and a
bonus based on a percentage of his earnings, both of which
were required by the terms of the contract.
Decision: Yes. The court ruled that Clark committed fraudulent
misrepresentation that had induced the employer to enter into
the employment contract. The court cited Professor Gerald
Fridman’s text The Law of Contract in Canada when explaining
the implications of this fraud: “A contract resulting from a
fraudulent misrepresentation may be avoided by the victim of
the fraud.” In this case, the court ruled that Clark was not entitled to claim any benefit under the contract—including notice of termination damages or his bonus—since his lies had
induced the employer to enter into the contract in the first
place.
Issue: Did the employee’s misrepresentations during the job
recruitment process entitle the employer to terminate the
wrongful dismissal: A type of lawsuit by an employee against a former employer alleging that the employer terminated their
contract without complying with the implied term in the contract requiring “reasonable notice.”
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Chapter 6 The Job Recruitment and Hiring Process 93
BOX 6.4 » CASE LAW HIGHLIGHT
Fraudulent Misrepresentation by a Job Applicant Not Relied on by Employer
Islip v. Coldmatic Refrigeration of Canada Ltd.
2002 BCCA 255
Key Facts: Coldmatic Refrigeration sought to hire Islip away
from a competitor. It made Islip an offer of employment for a
period of two years that included use of a truck and the right
of Islip to purchase the truck for $1 at the end of the contract.
During the negotiation stage, Islip informed Coldmatic that he
was paid $75,000 per year in his current job when in fact he was
only earning $64,000. Based on that information, Coldmatic
agreed to pay Islip $75,000. However, shortly thereafter Coldmatic reneged on its promise to sell Islip the truck for $1. Islip
claimed that was a fundamental breach of the contract, permitting him to quit and sue for unpaid wages (this is called a lawsuit
for constructive dismissal, which we explore in Chapter 13), plus
the value of the truck. Coldmatic argued that Islip committed
fraudulent misrepresentation when he lied about his previous
salary and therefore he could not claim damages under the
contract.
Issue: Did the employee’s misrepresentation during the job
recruitment process prevent him from claiming damages for
breach of contract by the employer?
Decision: No. The court ruled that all of the requirements of
“fraudulent misrepresentation” had been made out—the
worker had deliberately made a false statement about a fact
intending to deceive the employer—except that the employer
had not been induced to enter into the employment contract
by the lie. Coldmatic would have hired the employee anyway,
even if he had not lied about his previous salary because it was
trying to capture the market of Islip’s former employer. It was
prepared to pay Islip $75,000 to ensure he came to Coldmatic.
The employer argued that the lie was still grounds for dismissal
of Islip for cause (and without notice). The court disagreed,
finding that “the misrepresentation was not of such a serious
nature as to afford grounds for dismissal” without notice.* We
will learn in Chapter 12 that not every incident of dishonesty
by an employee creates grounds for summary dismissal without notice. The court ordered Coldmatic to pay Islip an amount
equal to one year’s salary (the contract permitted Coldmatic
to terminate Islip after one year) plus $27,500 to compensate
him for the lost value of the truck.
* A similar outcome was reached in Earle v. Grant Transport, 1995 CanLII
7289 (Ont. Gen Div). See also Zadorozniak v. Community Futures
Development Corp., 2005 BCSC 26 (failing to disclose a dismissal for
cause ten years earlier was not cause for dismissal).
IV. Chapter Summary
This chapter explained how, in the common law regime, judges have limited their role to policing the honesty of representations made by job applicants and employers. Judges have policed
honesty through a mix of tort law (torts of deceit and negligent misrepresentation) and contract
law (fraudulent misrepresentation). The common law regime does not prohibit discriminatory
recruitment decisions, such as giving preference to applicants of a certain gender, race, or religion. As we will learn in Part III, governments in Canada have filled this void by enacting a
variety of statutes that restrict an employer’s freedom to base hiring decisions on factors the state
deems inappropriate.
QUESTIONS AND ISSUES FOR DISCUSSION
1. Amanda believes she was denied a job because of her religion. Can she sue the employer
for discrimination in a common law court?
2. What is the difference between fraudulent misrepresentation and negligent misrepresentation?
3. What is the legal significance of a “duty of care” in cases involving the tort of negligence?
4. What was the employer’s misrepresentation in the case Queen v. Cognos Inc. (described in
Box 6.2)? On what basis did the court calculate damages owing to the employee in that
decision?
summary dismissal: Termination of an employment contract by an employer without notice to the employee in response to
a serious breach of contract by the employee.
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94 Part II The Common Law Regime
APPLYING THE LAW
1. May lied on her application for a job as a bottler sorter
at County Beer Company about which university she
attended. She is hired, but one year later the employer
learns of the dishonesty. The employer immediately
fires May, asserting that May’s misrepresentation permits it to terminate the contract with no notice to May.
May comes to you for legal advice on whether she can
sue County Beer for any damages. What would you tell
her? If there is any other information you would want
to know before giving your advice, what information
would that be?
2. Cary is a software engineer who suffers from cystic fibrosis. He was laid off from his job at a company
called MDA, where he was covered by a long-term
disability (LTD) insurance policy that would pay him
about $3,000 per month if he became sick and unable
to work. The job market was good at the time, and
Cary wanted a new job that would insure LTD benefits
at least equal to what he had at MDA. Cary was
offered a new job by Northern Engineering. He asked
Northern’s representative about eligibility under
Northern’s LTD plan. Cary was told that he would be
eligible for LTD provided he completed three months’
continuous employment without illness. He was given
a pamphlet that explained that LTD benefits were
equal to two-thirds of regular monthly income, which
would be $4,600/month. Cary accepted the job.
About one year later, he became sick and claimed LTD
benefits. Cary was advised that he was not eligible to
receive two-thirds of his regular pay because he had
failed to complete a medical questionnaire when he
was hired. Instead, he was only entitled to a maximum of $1,000 per month. Cary asks you whether he
could file a lawsuit against Northern Engineering and
tells you he only accepted the job at Northern because he thought he had LTD coverage guaranteeing
him about $4,600 per month. What advice would you
give?
EXERCISE
Lawyers “note up” important cases when they prepare to represent their clients. Noting up
involves searching previously decided cases that deal with similar facts and issues to the case
the lawyer is now dealing with. A leading case on negligent misrepresentation during the
recruitment stage is Queen v. Cognos Inc. (described in Box 6.2). Try this exercise on noting up
that decision.
1. Go to the CanLII home page: <https://www.canlii.org>.
2. In the “Document text” search box, type “Queen v. Cognos” and “employment.” That search
should give you over 500 decisions that cite the Queen decision. Not all of these decisions
will involve alleged misrepresentations during the employment recruitment process, but
some will.
3. Scroll through the decisions and look for a case that involves an alleged misrepresentation
by an employer or job applicant in the recruitment process. Read that decision.
4. Prepare a case summary similar to that presented in Box 6.2, including a brief summary
of (1) the key facts; (2) the main issue the court was asked to decide; and (3) the court’s
decision and the remedy (if any) ordered.
NOTES AND REFERENCES
1. Christie v. The York Corporation, [1940] SCR 139 at 142.
2. Ibid. at 141.
3. For an interesting discussion of Christie v. York, see E.
Adams, “Errors of Fact and Law: Race, Space, and Hockey
in Christie v. York” (2012) 62 UTLJ 463.
4. In recent years, some courts in Canada have ruled that it is
possible to include a claim for breach of a human rights
statute as part of a lawsuit for breach of the employment
contract, such as a claim for “wrongful dismissal,” which
we will discuss in Chapter 14. See, e.g., Sparrow v. The
Manufacturers Life Insurance Company, 2004 MBQB 281.
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Chapter 6 The Job Recruitment and Hiring Process 95
In Ontario, the Human Rights Code, RSO 1990, c. H.19,
s. 46.1 now grants courts the authority to order remedies
for violations of the Code as long as a violation of the
Code is not the sole basis for the lawsuit (s. 46.1). For an
example of a case that applies s. 46.1, see Wilson v. Solis
Mexican Foods Inc., 2013 ONSC 5799.
5. Modern courts often treat the tort of deceit and fraudulent misrepresentation interchangeably, although they are
distinct causes of action. Deceit is a tort, an element of
which is a fraudulent misrepresentation. Fraudulent misrepresentation is actually an action in contract law that
arises when a party to a contract was induced to enter
into the contract by a fraudulent statement. The innocent
party may rescind the contract, in addition to seeking
damages. For a good discussion of this distinction,
including other sources, see Lozinik v. Sutherland, 2012
ABQB 440.
6. G. Fridman, The Law of Contract in Canada, 3rd ed (Scarborough, ON: Carswell, 1994) at 295.
7. For a discussion of this tort, see A. Linden, L. Klar, and
B. Feldthusen, Canadian Tort Law: Cases, Notes & Materials, 13th ed (Toronto: LexisNexis, 2009) at chapter 10.
8. Hedley Byrne & Co. v. Heller & Partners, [1964] AC 465.
9. For cases applying negligent misrepresentation in the
recruitment context, see H.B. Nickerson & Sons Ltd. v.
Wooldridge, 1980 CanLII 2604 (NSCA); Steer v. Aerovox
Inc., 1984 CanLII 49 (NSSC); De Groot v. St. Boniface
General Hospital, 1994 CanLII 16687 (Man. CA); Khashaba v. Procom Consultants Group Ltd., 2018 ONSC 7617;
and Feldstein v. 364 Northern Development Corporation,
2017 BCCA 174.
10. Hedley Byrne, supra note 8 at 15.
11. See Lesage v. Canadian Forest Products Ltd., 2011 BCCA
259 (the failure to warn the employee of the possibility of
the job being eliminated in the future was not negligent
misrepresentation).
12. See, e.g., Grant v. Oracle Corp. Canada Inc., 1995 CanLII
16090 (Man. CA); Bureau v. KPMG Quality Registrar Inc.,
1999 CanLII 1479 (NSCA); Williams v. Board of School
Trustees, School District No. 63, 1986 CanLII 1207 (BCSC);
and Demichelis v. Vancouver Canucks Limited Partnership,
2014 BCSC 1368.
13. In Leacock v. Whalen, Beliveau & Associes Inc., 1998
CanLII 6452 (BCCA), the employee’s negligent misrepresentation during the hiring process resulted in the court
redefining the duration clause of the contract. The employee had been fired after three months. He argued that
his contract was for two years, and that he was entitled to
damages amounting to the pay he would have received had
he worked those two years. In its defence, the employer
argued that the employee had misrepresented his qualifications during the recruitment process. The court agreed,
ruling that the employee had committed the tort of negligent misrepresentation by being “less than frank” about his
sales performance at his previous job. The court then considered what remedy would make the employer whole, the
same test applied in Queen v. Cognos Inc., [1993] 1 SCR 87.
It found that had the employee not misrepresented his
qualifications, the employer would still have hired
Leacock. However, the employer would have bargained a
contract term of only one year, rather than two years.
Therefore, the court assessed the damages for the wrongful
dismissal based on a one-year contract.
14. See, e.g., Schafer v. Pan Matrix Informatics Inc., 1987
CanLII 3500 (Alta. QB) (eight lies by the employee during
the hiring process amounted to cause for summary dismissal); Clark v. Coopers & Lybrand Consulting Group,
2002 CanLII 45050 (Ont. CA); and Cornell v. Rogers Cablesystems Inc. (1987), 17 CCEL 232 (Ont. DC).
15. See D. Doorey, “Employer Bullying: Implied Duties of Fair
Dealing in Canadian Employment Contracts” (2005) 30
Queen’s LJ 500 at 523-24; and Smith v. Reichhold Ltd., 1989
CanLII 2875 (BCCA) (employee conduct that destroyed
an employer’s trust repudiates the employment contract).
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CHAPTER 7
The Requirements to Create and
Modify an Employment Contract
LEARNING OBJECTIVES
CHAPTER OUTLINE
After reading this chapter, students will be able to:
I. Introduction 97
II. The Requirements to Create a Legally Enforceable Employment Contract 98
A. Capacity to Enter into a Contract 98
B. Intention to Create a Legally Enforceable Contract 98
C. Three Elements of a Contract: Offer, Acceptance, and Mutual Consideration 100
III. Making Modifications to an Employment Contract 102
A. Contract Amendments When the Employee Agrees to the Change 103
B. Modifications When the Employee Does Not Agree to the Change 107
IV. Chapter Summary 109
Questions and Issues for Discussion 109
Notes and References 110
• Explain when a contract between an employer and an
“infant” or a person with a mental impairment is
legally enforceable.
• Explain when the intention to create a legally
enforceable contract exists.
• Define offer, acceptance, and mutual consideration, and
explain their significance in employment contracts.
• Explain how modifications can be made to an
employment contract.
I. Introduction
The successful outcome of the job recruitment process discussed in Chapter 6 is an employment
contract between an employer and an employee. Therefore, we have reached the point in the
book when we must turn our attention to the rules of contract law. In this chapter, we consider
the requirements to create a valid and enforceable employment contract, as well as the rules
governing amendments or variations to those contracts.
The essence of an employment contract is an exchange of a promise by the employee to perform work for a promise by the employer to pay for that labour. The common law regime presumes that employers and employees are informed, rational actors who voluntarily choose to
enter into employment contracts because doing so makes them better off than they otherwise
would be without the contract. This presumption breaks down, however, if one or both of the
parties lack the capacity to fully grasp the consequences of the bargain, or if the parties never
intend the arrangement to create legal obligations. I may offer to pay my 10-year-old daughter
$5 in exchange for her cleaning the kitchen, but neither of us would intend that we can drag the
other to court if she leaves the kitchen a mess or I refuse to pay up. We need to understand when
a promise creates legal obligations.
As explored in Chapter 5, the model of employment contracts we understand today really
only emerged in Canada during the 20th century. An important implication of the courts’ move
to treat the labour exchange as a form of contract was that the general rules of contract law
applied. We will learn in Chapter 9 that the courts used “implied terms” to create a special type
of contractual relationship that largely preserved the authority of employer over employee that
had existed in the master and servant era. However, the general rules of contract law have
shaped many of the core elements of the employment relationship, including the requirements
of offer, acceptance, and mutual consideration that we consider in this chapter. These
97
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98 Part II The Common Law Regime
r­ equirements determine whether a valid employment contract has been created and also shape
the rules regarding contract term modifications. There is a lot to cover, so let’s begin our lesson
in contract law!
II. The Requirements to Create a Legally Enforceable Employment
Contract
We will divide our discussion of the requirements to create a legally enforceable contract into
three parts: (1) capacity to contract; (2) intention to contract; and (3) the elements of a contract—offer, acceptance, and mutual consideration. Each of these requirements must be satisfied
for a promise of labour for money to be treated as a lawful employment contract.
A. Capacity to Enter into a Contract
As noted in the introduction, the common law presumes that a contract results from a meeting
of the minds of two free and informed parties who have assessed that they will benefit from the
exchange. The law needs to guard against exchanges where one of the parties lacks the capacity
to understand the implications of the deal. Should a child be able to enter into an employment
contract? It is easy to see why we might be concerned about this possibility. Children may not
understand what it means to enter into a contract or what they are actually agreeing to. They
could be taken advantage of. To guard against this possibility, the courts could prohibit—or
refuse to enforce—all contracts with minors or persons with mental disabilities. However, that
is not the approach that has been taken.
In the case of children under the age of 18 (called infants or minors in legal terminology), the
courts begin with the assumption that the contract is void. However, exceptions have been recognized by the courts (and sometimes by governments in legislation)1 in which employment
contracts with infants are enforced. The most important exception relates to a contract that,
overall, is for the benefit of the infant.2 If it is, then it is enforceable. Few modern cases involving
infant employment contracts exist, but one is a case involving John Tonelli, who won four Stanley Cups with the New York Islanders hockey team in the 1980s (see Box 7.1).
We noted in Chapter 1 that some of the vilest and most disturbing snapshots in the story of
the Canadian law of work involve abuse and mistreatment of child workers in late 19th-century
factories.3 By requiring employers to establish that a contract with a minor is for the minor’s
benefit, the courts retain some ability to police child exploitation at work. Contracts involving
employees with a mental impairment are treated in a similar manner. They are considered to be
voidable contracts. This means that they are not automatically void. However, if a court finds
that the mentally impaired party was unaware of what was being agreed to, or that the contract
is very unfair, it may void the contract.4
B. Intention to Create a Legally Enforceable Contract
Assuming that we have two parties that have the legal capacity to contract, the next issue is
whether they actually intend to create a legally enforceable contract. Judges do not want people
dragging each other to court over every little promise made in everyday interactions. In the
beautiful language of Lord Stowell in an 1811 decision: “[Contracts] must not be the sport of an
idle hour, mere matters of pleasantry and badinage, never intended by the parties to have any
serious effect whatever.”5 In other words, I should not be able to sue my daughter because she
forgot to load the dishwasher as we agreed.
infant: A person under the age of 18; also referred to as a minor in legal writing.
voidable contract: A contract that may be declared void at the option of one of the parties due to a deficiency. An example
is an employment contract involving an employee who is considered mentally impaired.
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Chapter 7 The Requirements to Create and Modify an Employment Contract 99
BOX 7.1 » CASE LAW HIGHLIGHT
The Enforceability of an Employment Contract Involving a Minor
Toronto Marlboro Major Junior “A” Hockey Club v. Tonelli
1979 CanLII 1969 (Ont. CA)
Key Facts: At age 17, Tonelli entered into a contract with the
Toronto Marlboro junior hockey team. It required him to play
for the Marlboros for three years, and then pay the team 20
percent of his hockey earnings for his first three years of professional hockey. In exchange, the Marlboros provided Tonelli
with a small wage, paid for his room and board and school
tuition, and gave him coaching, exposure, and a chance to
make the pros. When Tonelli turned 18, he informed the Marlboros that he was cancelling the contract. He signed with the
Houston Aeros, a professional hockey team. Tonelli argued that
the contract with the Marlboros was invalid because he was a
minor when he signed the agreement.
The court ruled that, although Tonelli received benefits
from the ­contract, overall the contract was onerous for him
and highly beneficial to the Marlboros. The court noted that
“where, as here, the bargaining position of the parties is manifestly unequal and one party is able to dictate terms to another, courts are increasingly vigilant to protect the weaker
party and reluctant to enforce the contract against him.”
Issue: Was the contract “for the benefit” of the 17-year-old
Tonelli and therefore legally enforceable?
Decision: No. The contract was unenforceable. The court explained the legal test for contracts with people under the age
of 18:
This contract, signed by Tonelli when he was an infant, falls into the category of a contract of service.
It can be enforced against him only if it was for his
benefit at the time it was made. The onus is on the
Marlboros to establish that it was for his benefit.
Whether it was or was not for the infant’s benefit is
a question of fact. … In making its decision, the
Court must construe the contract as a whole and
strike a balance between its beneficial and onerous
features. The contract is not to be invalidated simply
because it places some burdens upon an infant.
These principles of law are well established, and no
authority need be cited to support them.
John Tonelli.
Source: Ray Stubblebine/AP.
In assessing whether there was an intention to create a legal contract, judges ask whether a
“reasonable person” would assume that the intention existed, considering all of the facts. Let’s
pause here to note that this is known as an objective test. It asks, “What would a reasonable
person of normal intelligence think, if told about the circumstances?”6 A subjective test, in
contrast, asks, “What was this person actually thinking at the time?” Through the application of
an objective test, a judge can find that an intention existed to create a legally enforceable contract
even if one of the parties claims that they did not actually have that intention. We will come
across objective and subjective tests again later in this text.
objective test: A legal test used in interpretation of contracts and statutes that asks, “What would a reasonable person of
normal intelligence think, if told about the circumstances?” Contrast with subjective test.
subjective test: A legal test used in interpretation of contracts and statutes that asks, “What was this person actually thinking
at the time?” Contrast with objective test.
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100 Part II The Common Law Regime
An intention to create legal relations is usually assumed in the typical employment relationship involving an employer who offers a job to an employee, but not always. For example, consider a situation that may be familiar to many students: the unpaid internship. Often companies
offer to permit a person to shadow an employee or do a variety of tasks as a way to gain experience and connections, but without an offer to “employ” or pay wages. Has an employment
contract been created in such a situation? See Box 7.2 for a discussion of this issue.
The Sarmiento case demonstrates that the common law regime is not very helpful to unpaid
interns, volunteers, or trainees who agree to work for free in exchange for experience but then
later argue that they were really “employees” and subject to an employment contract. Therefore,
workers in this situation have more often looked to the regulatory standards regime, especially
employment standards legislation, as the worker did in the Pichette v. Lumac Holdings case discussed in Box 4.7 in Chapter 4.7
BOX 7.2 » CASE LAW HIGHLIGHT
The Intention to Create a Binding Employment Contract
Sarmiento v. Wilding & Rampage Entertainment
2008 BCPC 232
Key Facts: Sarmiento was looking for experience in the film
industry and agreed to volunteer as an intern with Rampage,
a small film production company. After she stopped working
for the company, she filed a lawsuit claiming that she had been
“hired” as an employee and was owed $25,000 for the work
she performed for the company.
Issue: Did the parties enter into a legally enforceable contract
requiring the payment of wages to the worker for work
performed?
Decision: No. The court accepted the company’s argument
that Sarmiento had agreed to volunteer and that no mutual
intention to create legal relations had existed:
The evidence does not show Sarmiento was “hired”
to work for Rampage generally or that after a period
of training, she took on the mantle of paid employee. Nothing in the evidence showed that the
relationship between the parties changed or that
there was any consideration indicative of the parties
entering into an employment contract …. Quite
apart from whether Sarmiento was an employee or
intern, I find the evidence does not support holding
that [Sarmiento] and Rampage had a common intention to enter into an employment contract. With
the funding structure and limited financing behind
Rampage, I am unable to conclude [the company]
was looking to hire staff or that [it] employed
Sarmiento in the capacity she wanted the Court to
believe.*
* See also Evard v. University of BC (Alma Mater Society) (1995), 14 CCEL
(2d) 124 (BCSC) (a student university newspaper editor was not entitled
to compensation because there was no intention to create a legally
enforceable contract).
C. Three Elements of a Contract: Offer, Acceptance, and Mutual Consideration
Finally, even if two parties have the capacity to contract and intend to create a legally enforceable
contract, they may still fail to create a valid, legally enforceable contract. Common law judges
determined very long ago—long before employment contracts existed—that for any agreement
to become a legally binding contract, an offer must be made by one party that is accepted by another party, and mutual consideration must exist between the parties. These requirements apply
to employment contracts in Canada today.
1. Offer and Acceptance
In the case of an employment contract, the first two requirements of offer and acceptance are
usually satisfied without much controversy. In the usual course, an employer will offer to
employ a worker, and the worker will accept that offer. The acceptance must be unequivocal
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Chapter 7 The Requirements to Create and Modify an Employment Contract 101
such that both parties understand that they are entering into a binding contract. Consider a
typical “offer letter” that an employer might send to a prospective employee, as depicted in
Box 7.3.
Since the offer letter in Box 7.3 expressly and clearly indicates that the employee’s signature
constitutes acceptance of both the offer letter and the attached contract of employment, there
should be little dispute about what was offered and whether the employee accepted it.8
However, sometimes it is less clear what the employer offered or whether the employee
accepted the offer. In many cases, no written contract or offer setting out what the contract’s
terms will be is used. In such cases, the evidence that an offer was made by one party and
accepted by another must be gleaned from the conduct of the parties or from oral testimony or
other documentary evidence put before a judge that describes what the parties discussed. In
Box 7.5, later in this chapter, we consider a case in which a judge was asked to decide whether a
verbal offer of employment was made and accepted during a telephone conversation.
BOX 7.3 » TALKING WORK LAW
The Offer and Acceptance of an Employment Contract
Dear Ms. Cheng:
We are pleased to offer you employment at County Beer Company commencing on
Monday, January 20, 2020.
As an employee of County Beer, you are entitled to coverage under our employee
health plan after completion of three months’ continuous employment. Please find
attached our standard Contract of Employment, which together with this offer letter,
constitutes your employment contract. You should review the terms in that contract
and consult a lawyer if you wish. Provided the terms are acceptable to you, please verify
your acceptance of our offer of employment by signing on the space provided below.
This offer of employment is open until 5 p.m. on Friday, January 17, 2020. If you have
not returned a signed acceptance of this offer by that time, this offer expires.
We are excited to have you aboard! County Beer is a modern, friendly, great place to
work with a lot of opportunities to advance for hard-working, positive employees.
Sincerely,
Dylan L. Wilson
Dylan L. Wilson
Director of Human Resources
I ___________________ have read this offer letter and the attached Contract of
Employment. I have sought legal advice or have elected voluntarily not to seek legal
advice to review the contents of the contract. My signature below indicates my
acceptance of this offer of employment and the terms set out in this offer letter and the
attached Contract of Employment.
____________________________ ____________________________
Employee’s SignatureDate
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102 Part II The Common Law Regime
2. Mutual Consideration
“Consideration” means something of value or a benefit. Therefore, when we say that an employment contract must contain mutual consideration, we mean that it must provide something of
value to both the employer and the employee that they otherwise would not receive. The consideration need not be equal to both parties. In fact, the courts have said that they will “not enter into
an inquiry as to the adequacy of consideration” and “anything of value, however small the value,
is sufficient consideration to support a contract at law.”9 Law students learn early in their contracts course about the case of Chappell & Company v. Nestle, in which the British House of
Lords famously wrote “A peppercorn does not cease to be good consideration if it is established
that the promisee does not like pepper and will throw away the corn.” My contracts professor
used to yell at us, “Where is the peppercorn!” whenever a question of mutual consideration
arises in a case.10 My law school touch football team was called the Raging Peppercorns. You get
the idea. Mutual consideration is important.
The requirement for mutual consideration rarely creates a problem at the time an employment contract is first created. It is easy to see how consideration would normally flow both ways
in a typical employment relationship. The employee receives money (a wage) and perhaps some
other benefits, such as health or dental insurance or pension contributions. In exchange, the
employer receives the employee’s labour power and a promise to comply with legally permissible
directions issued by the employer.
However, the requirement of mutual consideration applies to contract modifications (or
amendments) as well. It is in this context that problems occasionally arise. For a change to a
contract to be legally enforceable, both employee and employer must receive something new of
value that they were not otherwise already entitled to under the existing (prior) contract. Canadian employers have sometimes run into problems when they have attempted to make a change
to an employment contract that would benefit the employer without also giving a new benefit
to the employee. In that case, as we will see next, the amendment can be ruled invalid for lack
of “fresh” consideration to the employee, even if the employee agreed to the change.
III. Making Modifications to an Employment Contract
Competing policy interests are in tension in the law that regulates mid-term contract modifications. On the one hand, good policy reasons exist to allow employers “flexibility” in governing
the workplace in order to adapt quickly to changes in the business environment. It is impossible
to predict all of the circumstances that could arise during the life of an indefinite-term employment contract. If terms of employment are fixed by contracts entered into months or even years
earlier, the employer’s ability to adapt to new market demands is impeded, which could threaten
the viability of the business.
On the other hand, employees have an interest in predictability and stability in their employment conditions. If employers can simply change the contract terms whenever it suits them,
then the original contract terms that employees accepted would be meaningless. Fear of reprisals may lead employees to agree with whatever changes the employer proposes, since employers can always terminate the contract simply by giving notice. The requirement for mutual
consideration to modify a contract provides a small measure of protection for employees against
an employer that might want to force through contract changes that benefit the employer.
The requirement for mutual consideration to amend a contract dates back to the famous 1809
contract case of Stilk v. Myrick, discussed in Box 7.4. Stilk v. Myrick took place two centuries ago,
but it is not hard to see how the rule applied in that case is still relevant to modern-day employment situations. At its core, Stilk v. Myrick is an employment case in which the parties agreed to
amend the contract terms in the middle of the contract. However, the amendment was unenforceable because “new consideration” did not flow to both parties.
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Chapter 7 The Requirements to Create and Modify an Employment Contract 103
BOX 7.4 » CASE LAW HIGHLIGHT
The Origins of Mutual Consideration in Employment Contracts
Stilk v. Myrick
(1809), 170 ER 1168
Key Facts: Stilk agreed to work as a seaman on a dangerous
sea voyage for 5 British pounds per month. Two other seamen
deserted the ship, creating more work for Stilk on the return
voyage. The captain (Myrick) offered to pay Stilk more for the
return voyage for the additional work that would be required.
However, when the voyage was done, Myrick refused to pay
Stilk the additional amounts he had promised. Stilk sued to
recover that money.
Decision: No. In the original contract for 5 pounds per month,
the seamen had already agreed to perform “all that they could
under all the emergencies of the voyage” and were bound “to
exert themselves to the utmost to bring the ship in safety to
her destined port.” Sometimes things happen on a voyage that
create more work for the crew, and the original contract contemplated that. Therefore, Myrick received nothing new in
exchange for his promise to pay Stilk more than the original 5
pounds. As a result, because he received no “new consideration,” Myrick’s promise to pay Stilk more than 5 pounds per
month was not an enforceable agreement.
Issue: Was the captain’s promise to pay Stilk more than agreed
to in the original contract enforceable?
In the Stilk case, it was the purchaser of the labour (the “employer,” Myrick) who benefited
from the rule. More often today the rule benefits employees. A typical situation involves an employer that wants to amend or vary the terms of the employment contract, such as by reducing
employee compensation or the amount of notice required to terminate the contract. It is possible for an employment contract to include expressed language that explains how a mid-term
amendment can occur. For example, a contract might include a term like this:
The Contract may be modified or changed in whole or part according to the will of the parties, but
all such changes or modifications must be agreed to and shall not take effect until they are in writing
and signed by both parties.
That language requires both parties to agree to the change and therefore, in theory at least,
gives the employee the right to veto any change by withholding consent to a proposed change.11
If a contract includes a clause like that, then new consideration would not be needed to make
the amendment, since mutual consideration was exchanged at the time the contract was initially
formed.
However, most employment contracts do not include expressed language dealing with
mid-term contract amendments. Therefore, the normal common law rules of contract apply,
and the Stilk decision tells us that an amendment to an employment contract without an
expressed variation clause is only enforceable if (1) both parties agree to the change, and (2)
both parties receive new consideration—some new benefit not required by the original contract.
We can separate the contract modification rules into two categories: (1) modifications with
agreement of both parties, and (2) modifications when one party does not agree to the change.
A. Contract Amendments When the Employee Agrees to the Change
In order to understand the next two cases, which deal with attempted amendments to employment contracts, you need to know something about a topic we will discuss in detail in Chapters
9 and 10. In the common law regime, there is an “implied” obligation on employers to provide
employees with “reasonable notice” of the termination of the employment contract. “Implied”
means that the requirement to give reasonable notice exists, unless there is a term in the contract
that expressly states otherwise. Judges decide how much notice is “reasonable,” applying criteria
we consider in Chapter 10.
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104 Part II The Common Law Regime
For now, all you need to know is that reasonable notice can be quite a lengthy period of time
(up to two years or more for a long-serving employee). Therefore, employers often seek to avoid
implied reasonable notice by including a written contract term requiring a defined amount of
notice that is less than “reasonable notice.” The next two cases involve attempts by employers to
introduce a new written notice of termination clause to replace the existing implied requirement
to provide reasonable notice of termination.
Rejdak v. Fight Network Inc., discussed in Box 7.5, provides a useful demonstration of
how the requirements of offer, acceptance, and mutual consideration come into play in the
employment setting, including in the context of a contract amendment. Let’s consider it in two
parts, separating out the issues of offer and acceptance, and mutual consideration.
BOX 7.5 » CASE LAW HIGHLIGHT
Offer, Acceptance, and Mutual Consideration
Rejdak v. Fight Network Inc.
2008 CanLII 37909 (Ont. Sup Ct J)
Key Facts: Rejdak argued that a verbal offer of employment
was made by The Fight Network (TFN) in a Friday night telephone conversation. The terms of that contract included the
salary amount, job title, and start date. There was no discussion of how much notice of termination would be required.
Rejdak accepted the offer, quit his existing job, and began
work at TFN the following Monday. During that first day, TFN
gave Rejdak a written employment contract and asked him
to sign it. Rejdak took the written contract home and returned
it signed the following day. The written offer allowed the employer to terminate Rejdak’s employment with no notice while
he was on “probation.” Rejdak’s contract was terminated during the probation period without notice. Rejdak sued the
employer, arguing that the original verbal contract included
an implied right to “reasonable notice” of termination and that
the written contract with the probation period was unenforceable because he received no fresh consideration in exchange for giving up his greater entitlement to reasonable
notice.
Issue One (Offer and Acceptance): Did the parties enter into
a verbal employment contract during the Friday night telephone conversation?
Decision: Yes. A verbal offer was made during the phone call,
which was accepted by Rejdak. The judge wrote:
I conclude that on [Friday] August 5, [the employer]
offered and Mr. Rejdak accepted a job on the following terms: his title was editor and creative director; his annual salary was $50,000; and he was to
start on Monday, August 8, 2005. There was no
indication on August 5 that his employment was
subject to a probationary period. Mr. Rejdak began
work at TFN prior to signing the employment agree-
ment. I ­conclude that there was an oral employment contract entered into by the parties on Friday
evening.
Issue Two (Mutual Consideration): Did the parties lawfully
amend the oral contract when they signed the written contract
on the second day of work?
Decision: No. According to the judge, the employee received
no new consideration in exchange for granting the employer
the benefit of a new probationary period:
Mr. Rejdak’s position is that the written employment
agreement is of no force or effect because there was
no fresh consideration. … TFN submits that the employment agreement signed on August 9, [2005],
provided two benefits to Mr. Rejdak which constitute new consideration. The first added benefit was
paid vacation. The agreement provided that Mr.
Rejdak would be entitled to two weeks’ vacation. If
he did not take all of his vacation in a particular year,
he could carry up to one-week vacation into the
next year. The second benefit under the contract
was a health benefit plan: Mr. Rejdak was entitled to
participate in TFN’s employee benefit plan or a private plan, if no employee plan existed. …
I do not accept that either benefit constitutes
additional consideration. The paid vacation merely
reflects the two-week statutory minimum [already
required by the Employment Standards Act].
Mr. ­Rejdak would reasonably have expected to receive the health benefit plan since it was a standard
benefit provided to all TFN employees.
The court found that the original oral contract required
that the employer provide Rejdak with “reasonable notice,”
which the court ruled was four months. Rejdak was entitled
to damages based on lost wages for a period of four months.
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Chapter 7 The Requirements to Create and Modify an Employment Contract 105
Rejdak v. Fight Network Inc. offers three important lessons about the common law rules of
contract. First, amendments to an employment contract are only enforceable if there has been
mutual consideration.12 Second, a verbal offer by an employer to employ a job applicant
can create an enforceable employment contract if the worker accepts the offer; a written
contract is not necessary, and indeed, many employees in Canada have never signed a
written contract.13 Third, if an employee commences work before having signed a written
employment contract, then a written contract introduced afterward constitutes a proposed
modification to the original verbal contract, and unless the parties had agreed otherwise, that
verbal contract includes an implied requirement that the employer provide the employee with
“reasonable notice” of termination.
In the decision outlined in Box 7.6, the employee had signed an offer of employment one
month before he commenced work and was then instructed to sign a written contract on his first
day of work. The written contract limited the amount of notice the employer was required to
give if it decided to terminate the contract.
Notice that in both Francis v. CIBC and Rejdak v. Fight Network, the employees signed the
new written contracts, yet the courts ruled that the notice of termination clauses in those contracts were unenforceable due to a lack of fresh consideration. An employee’s written agreement
does not fix an absence of mutual consideration.
BOX 7.6 » CASE LAW HIGHLIGHT
New Consideration Needed to Modify a Contract
Francis v. Canadian Imperial Bank of Commerce
1994 CanLII 1578 (Ont. CA)
Issue: Was the amendment to the notice of termination provision in the employment agreement enforceable?
Key Facts: Francis was given an offer of employment letter
from CIBC on June 9, 1978, which he accepted in writing several days later. That agreement included no provision about
notice of termination, and, therefore, it included an implied
contract term requiring “reasonable notice” of termination. On
July 4, 1978, his first day of work, CIBC presented him with a
new document entitled “Employment Agreement.” That document said that CIBC could terminate the contract by giving
Francis three months’ notice. Francis signed it and commenced
work. When Francis was dismissed in 1987, CIBC relied on the
“three months’ notice” term in the written employment agreement. Francis sued for wrongful dismissal, arguing that the
notice clause in that agreement modified the original contract
that entitled him to “reasonable notice” and that he had received no new consideration.
Decision: No. The court ruled that the employment agreement
signed on the first day of work in July 1978 modified the earlier
contract reached by the parties in June. That modification
granted the employer an important new ­benefit—the right to
terminate the contract with three months’ notice rather than
“reasonable notice,” which would be much longer than three
months. There was nothing new in the written contract that
benefited Francis that he was not already entitled to as per the
original written employment offer that he accepted one
month before his first day on the job. Francis was entitled to
reasonable notice of termination, as per the original contract
executed in June 1978. The court determined that notice period to be 12 months. Therefore, Francis was entitled to damages based on a period of 12 months from the date he was
dismissed.
In a 2018 decision, the British Columbia Court of Appeal ruled that mutual consideration
was no longer required to lawfully amend a contract, provided that both parties agreed, there
was no “duress,” and there is no other policy reason why the amendment should not be
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106 Part II The Common Law Regime
enforced.14 That decision, called Rosas v. Toca, did not involve an employment relationship, and
as I write this in early 2019, there has been no decided case involving an employment contract
that applies its reasoning. Regardless of whether the novel approach in Rosas v. Toca takes hold
in other contexts, there is good reason to believe that courts will preserve the requirement for
mutual consideration in the employment context owing to the inequality of bargaining power
between employer and employee that courts have long recognized and that we will discuss
throughout this book. This inherent inequality is discussed in Box 7.7.
BOX 7.7 » TALKING WORK LAW
How Inequality of Bargaining Power Affects the Common Law
The Francis v. CIBC ruling has been applied in many subsequent
cases in which employers attempted to rely on amended terms
of employment contracts even though the employee had received no new consideration in exchange for the amendment.
In one such case, called Hobbs v. TDI Canada Ltd., the Ontario
Court of Appeal referred to the inequality of bargaining power
common in the employment relationship:
The requirement of consideration to support an
amended agreement is especially important in the
employment context where, generally, there is
inequality of bargaining power between employees and employers. Some employees may enjoy a
measure of bargaining power when negotiating
the terms of prospective employment, but once
they have been hired and are dependent on the
remuneration of the new job, they become more
vulnerable.*
The court was recognizing here that employees often will
not feel free to refuse an employer’s demand for a contract
modification since a refusal could possibly lead to their dismissal. The theme of inequality of bargaining power is prominent in the law of work, as we discussed in Part I of this text.
The requirement for the employee to receive something of
value (consideration) in the amendment provides some small
measure of protection for the employee. However, since the
courts do not assess the value of consideration or insist that
employees receive “fair” value in the exchange, the requirement
for mutual consideration is not a very onerous hurdle for employers to overcome.
* Hobbs v. TDI Canada Ltd., 2004 CanLII 44783 (Ont. CA) at para 42.
Some employers have argued that simply continuing to employ the employee constitutes new
consideration in exchange for a contract modification. In other words, the employer says, “I
could fire you right now, but I won’t if you agree to this amendment.” The problem with this
argument is that the employer is already required to continue the employment contract, unless
it provides the employee with the amount of notice to terminate it required in the contract. In
Globex Foreign Exchange Corporation v. Kelcher, the Alberta Court of Appeal explained why
continued employment alone is not fresh consideration:
[C]ontinued employment alone does not provide consideration for a new [benefit to the employer]
extracted from an employee during the term of employment because the employer is already required
to continue the employment until there are grounds for dismissal or reasonable notice of termination
is given.15
However, what if the employer goes further, and says, “If you agree to this modification, I
promise not to exercise my contractual right to terminate the contract not only today, but also
for some period of time into the future”? Could this exchange provide the employee with a new
benefit: greater job security than they had the moment before they agreed to the modification?
The courts call a promise not to exercise a right to terminate the contract for a future period of
contract modification: A change to one or more terms of the contract during the term of the contract.
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Chapter 7 The Requirements to Create and Modify an Employment Contract 107
time a forbearance. Forbearance can constitute new consideration to support a contract modification, as discussed in the decision in Box 7.8.16
BOX 7.8 » CASE LAW HIGHLIGHT
Is a Promise Not to Terminate a Contract for a Specified Time Fresh Consideration?
Techform Products Ltd. v. Wolda
2001 CanLII 8604 (Ont. CA)
Key Facts: In 1989, Wolda signed a consultancy agreement with
Techform to work on special projects at a fixed hourly rate that
could be terminated with 60 days’ notice. In 1993, Techform
asked Wolda to sign a new contract (the ETA contract) that
granted ownership to Techform of inventions Wolda created
while working for Techform. Wolda did not want to sign, but felt
he had no choice because Techform made clear that it would
terminate his consultancy contract if he refused to sign, and he
needed the work. In 1997, Wolda invented a “3D hinge” and he
requested that Techform pay him a royalty for each sale. This
annoyed Techform, which claimed they owned the invention
because of the ETA contract. After Techform terminated the
consultancy contract, the two sides sued one another. Wolda
argued that he owned the 3D hinge and that the ETA contract
was unenforceable because he had received no fresh consideration when it was signed in 1993. Techform argued that Wolda
received consideration in the form of an agreement by Techform
not to exercise its right to terminate the consultancy agreement
with 60 days’ notice for some period into the future.
Issue: Did Wolda receive fresh consideration in the form of an
agreement by Techform to abstain from exercising its right to
give 60 days’ notice of termination?
Decision: Yes. The court ruled that it was clear that had Wolda
not signed the ETA contract, Techform would have exercised
its rights under the consultancy contract to terminate Wolda
with 60 days’ notice. The court of appeal concluded that there
was evidence that
if Wolda did not sign the ETA his services would be
terminated on 60 days’ notice. In presenting the ETA
to Wolda in the circumstances of this case, Techform
must be taken to have tacitly promised to forbear
from dismissing the employee for a reasonable period
of time thereafter. That promise was in fact fulfilled.
The appellant retained the respondent’s services for
a further four years and terminated those services
only when he breached the ETA. In my view, therefore, there was consideration for the ETA. [Emphasis
added]
In the cases we have considered so far, the worker agreed to the modification and the issue was
whether there was consideration flowing back to the employee. Only in Wolda did the court find
fresh consideration, and it took the form of a promise by Techform to not exercise its contractual
right to terminate Wolda for some period of time into the future—a forbearance. More often, an
employer will just give the employee something small of value, such as a signing bonus or a pay
raise. For example, in the 2018 case Lancia v. Park Dentistry, the employer introduced a new,
revised employment contract and, in consideration for employees signing, provided a one-time
$2,000 bonus.17 The court ruled that this was valid consideration.
B. Modifications When the Employee Does Not Agree to the Change
What if the employee does not agree to the employer’s proposed contract modification? What if
the employer says, “We want you to agree to this change to the contract” and the employee says,
“No thanks”? This scenario arose in the 1957 case of Hill v. Peter Gorman Ltd. The employer
announced to salespeople that it was going to begin withholding part of their ­commissions to
forbearance: A promise by one party in a contract to another party to refrain from exercising a contractual right for a period
of time. A forbearance by an employer to not exercise the contractual right to terminate the employment contract may constitute
consideration flowing to an employee.
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108 Part II The Common Law Regime
offset delinquent accounts. This act constituted a modification to the contract. Hill refused to
accept the modification, but the employer nevertheless withheld his commissions. When the
employee later quit, he sued and successfully recovered the withheld commissions. The court of
appeal ruled that, when faced with an employee who does not agree to a proposed modification,
the employer can terminate the contract in its entirety by giving proper notice, and then offer a
new contract on revised terms, but it cannot unilaterally impose the modification:
If the [employee] made it clear … that he did not agree to the change … the proper course for [the
employer] to pursue was to terminate the contract by proper notice and to offer employment on
the new terms. Until it was so terminated, the [employee] was entitled to insist on performance of
the original contract.18
A similar situation arose in the more recent case of Wronko v. Western Inventory Service Ltd.
(see Box 7.9).
The basic lesson from Hill v. Gorman and Wronko v. Western Inventory is that an employer
cannot simply impose a modification to an employment contract without the employee’s
BOX 7.9 » CASE LAW HIGHLIGHT
When No Agreement Exists to Modify an Employment Contract
Wronko v. Western Inventory Service Ltd.
2008 ONCA 327
Key Facts: The employment contract, dated December 2000,
required the employer, Western, to provide Wronko with two
years’ salary if he was terminated. In 2002, the president of
Western approached Wronko with a new contract that required only 30 weeks’ pay to terminate the contract. Wronko
refused to sign the new agreement. Western then gave Wronko
two years’ notice that it would amend the notice of termination
term in the contract from two years to 30 weeks. When the two
years were up, in 2004, Western sent Wronko the revised contract with the 30 weeks’ notice term and told him if he did not
sign it, he no longer had a job. Wronko did not sign. He took
the position that he had been terminated, and he sued the
employer for damages equal to two years’ wages as per the
original 2000 contract. Western argued that it had the right to
unilaterally modify a contract provided that it gave proper
notice to Wronko and that Wronko had quit.
Issue: Was the employer within its rights to unilaterally change
the notice of termination clause provided it gave notice of the
change to Wronko?
Decision: No. Wronko was terminated when he was told that
there would be no job for him unless he signed an agreement
with the reduced notice of termination period.
The court summarized the three options available to an
employee when the employer attempts to unilaterally amend
an employment contract:
First, the employee may accept the change in the
terms of employment … in which case the employment will continue under the altered terms.
Second, the employee may reject the change
[quit] 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” ….
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.
The situation in this case fell under the third option. However, the employer did not terminate the original contract and
offer Wronko a new contract on different terms. Rather, it
waited two years and then attempted to unilaterally impose
the modification on Wronko.
Wronko was entitled to two years’ compensation, as per
the term of the original 2000 contract (minus moneys he received from other employment during that two-year period,
which is a result of a rule called mitigation that we will learn
about in Chapter 14 in the discussion of damages for breach
of the employment contract).
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Chapter 7 The Requirements to Create and Modify an Employment Contract 109
a­ greement. Absent agreement by the employee, the employer who insists on the amendment
must provide the employee with the proper amount of notice required by the contract to terminate the contract and inform the employee that once that notice period is over, employment
will only continue according to the modified contract terms.
Table 7.1 summarizes what we have learned in this chapter about modifications to employment contracts.
TABLE 7.1
The Modification of Employment Contracts
Scenario
Action Required
1. The employment contract includes
a clause describing the process for
contract modification.
The employer and employee must comply with the specified rules
for contract modification.
2. The employment contract does not
include a clause describing the
process for contract modification.
a. Both employer and employee
agree to the modification.
Both sides must receive new consideration as a result of the
modification.
b. The employer and employee do
not both agree to the
modification.
The contract cannot be unilaterally modified by the employer. The
employer must provide the employee with the amount of notice
required to properly terminate the contract and inform the
employee that, once the notice period is over, employment will only
continue if the employee agrees to the modified contract terms.
IV. Chapter Summary
In this chapter, we explored the requirements to create an employment contract: (1) the parties
must have the legal capacity to contract; (2) the parties must have the intention to create a legally
enforceable contract; and (3) the contract must comprise an offer, an acceptance of that offer,
and mutual consideration. The absence of any of these requirements can prevent a court from
enforcing an agreement between an employer and employee. We also learned how this requirement for mutual consideration applies to contract modifications. A modification to an employment contract that is not supported by “fresh” consideration flowing to both parties will most
likely not be enforced by a court, even if both parties agreed to the amendment.
QUESTIONS AND ISSUES FOR DISCUSSION
1. Is an employment contract between an employer and an “infant” or a worker who is mentally impaired always unenforceable? Explain.
2. What is the difference between an “objective test” and a “subjective test”? How does this
distinction matter when the courts assess if there was an intention to create a legally
enforceable employment contract?
3. Explain the significance of offer, acceptance, and mutual consideration in employment law.
4. Must an employment contract be in writing to be enforceable?
5. If a contract includes a written term allowing the parties to modify the contract as long as
both parties agree to the modification in writing, must both parties receive new consideration for the modification to be enforceable?
6. What is “forbearance” in contract law? Explain how forbearance can constitute fresh
consideration.
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110 Part II The Common Law Regime
APPLYING THE LAW
County Beer began as a small micro-brewery with just a handful of employees. The owners did not have a background in
law or human resource management (HRM), and they did not
require their employees to sign written employment contracts.
The company grew, and the owners decided it was time to hire
an HRM professional. Amanda Willow was hired. Amanda realized that employees did not have written contracts, and she
remembered from her employment law class that this probably meant that the employer would be required to give those
employees “reasonable notice” of termination, which could be
quite long. She decides to ask the employees to sign new
written contracts that provide the employees with the same
wages and benefits they are getting now, but also permits the
employer to terminate the employee by providing the minimum amount of notice required by employment standards
legislation (which would be much less than “reasonable
notice”).
She gives the new contract to the employees and asks them
to sign. Some employees sign, but Mark and Ahmed refuse,
saying they do not agree to the reduced notice of termination
requirement.
a. Would an employee who signed the new written
contract have an argument later on that the notice
of termination clause in that contract is unenforceable and that they should be entitled to a longer
period of “reasonable notice”?
b. If Amanda wants to ensure that the change she
wants to make is legal and enforceable, how would
you recommend she deal with the employees Mark
and Ahmed who have refused to sign the new written contract? Assume Mark and Ahmed were hired
the same day five years earlier and that a court
would find that “reasonable notice” to terminate
both of them is six months.
NOTES AND REFERENCES
1. See, e.g., British Columbia Infants Act, RSBC 1996, c. 223,
s. 21. See discussion in M. Mahadeo, “Minor Matters:
Ensuring the Enforceability of Contracts with Minors in
the Entertainment Industry” (2015) 93:1 Can Bar Rev 277.
2. The roots of the exceptions are deep and begin with the
concept that an “infant” contract for “necessaries” is
enforceable. In Doyle v. White City Stadium Ltd., [1935]
1 KB 110, the court described the rule as follows (at 131):
“An infant may bind himself to pay for his necessary meat,
drink, apparel, and such other necessaries, and likewise for
his good teaching or instruction, whereby he may profit
himself afterwards,” and to that has been added in the
course of years contracts of service that are to an infant’s
benefit. Contracts for apprenticeships and employment
contracts have been found to fall within a branch of the
rule, provided that the contracts are generally “for the
benefit” of the employee. Not all employment contracts
meet this standard, as demonstrated in the case of Toronto
Marlboro Major Junior “A” Hockey Club v. Tonelli, 1979
CanLII 1969 (Ont. CA) discussed in Box 7.1. See also De
Francesco v. Barnum [1890] 45 Ch D 430; and Butterfield v.
Sibbitt and Nipissing Electric Supply Company Ltd., [1950]
OR 504 (Sup Ct J).
3. See J. Rinehart, The Tyranny of Work, 2nd ed (Toronto:
Harcourt Brace, 1987) at 39-40; Karl Marx famously
described conditions of work of children in British factories of the 19th century in K. Marx, Capital, vol 1 (New
York: Penguin, 1976) at 356; J. Parr, Labouring Children:
British Immigrant Apprentices in Canada, 1869 – 1924
(Montreal: McGill-Queen’s University Press, 1980); and
M. Levine, Children for Hire: The Perils of Child Labour in
the United States (Westport, CT: Praeger, 2003).
4. A contract involving a mentally impaired employee might
also now be treated as an incident of unconscionable contract if it is considered to be grossly unfair to the employee.
See S.M. Waddams, The Law of Contracts, 4th ed (Aurora,
ON: Canada Law Book, 1999) at 487-88; Hardman v. Falk,
1955 CanLII 308 (BCCA); and Canadian Imperial Bank of
Commerce v. Milhomens, 2004 SKQB 168.
5. Dalrymple v. Dalrymple (1811), 2 Hag. Con. 54, quoted in
G. Chesire & C. Fifoot, The Law of Contracts, 7th ed
(Sydney: Butterworths, 1969) at 94.
6. See Andrews v. Canada (Attorney General), 2019 NLSC 42
at paras 17-19.
7. Pichette v. Lumac Holdings Ltd., 2011 CanLII 80536 (NB
LEB).
8. An offer to enter into an employment contract can be made
conditional on a future event occurring; this is known as a
“condition precedent” in contract law. In that case, the
acceptance of the offer does not become valid until the
condition precedent has been satisfied. For example, an
offer of employment may be made conditional on approval
by a board of directors: Bowen v. Canadian Tire Corp.
(1991), 35 CCEL 113 (Ont. Gen Div).
9. J. McCamus, The Law of Contracts (Toronto: Irwin, 2012)
at 226, 229.
10. Chappell & Company v. Nestle Co. [1960] AC 87.
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Chapter 7 The Requirements to Create and Modify an Employment Contract 111
11. See the discussion of the enforceability of expressed contract variation clauses in G. England, Individual Employment Law (Toronto: Irwin, 2008) at 41. See also the
discussion in Long v. Delta Catalytic Industrial Services
Inc., 1998 CanLII 18145 (Alta. QB).
12. Other cases in which a contract modification failed due to
lack of mutual consideration include Francis v. Canadian
Imperial Bank of Commerce, 1994 CanLII 1578 (Ont. CA);
Holland v. Hostopia Inc., 2015 ONCA 762; Globex Foreign
Exchange Corporation v. Kelcher, 2011 ABCA 240; Braiden
v. La-Z-Boy, 2008 ONCA 464; Hobbs v. TDI Canada Ltd.,
2004 CanLII 44783 (Ont. CA); McLean v. The Raywal
Limited Partnership, 2011 ONSC 7330; Fasullo v. Investments Hardware Ltd., 2012 ONSC 2809; Singh v. Empire
Life Ins. Co., 2002 BCCA 452; Orlan Karigan & Associates
Ltd. v. Hoffman, 2001 CanLII 28293 (Ont. Sup Ct J); and
Kohler Canada Co. v. Porter, 2002 CanLII 49614 (Ont. Sup
Ct J). Cases in which a modification was found to be supported by consideration to the employee include Clarke v.
Insight Components (Canada) Inc., 2008 ONCA 837; Techform Products Ltd. v. Wolda, 2001 CanLII 8604 (Ont. CA);
Maguire v. Northland Drug Co. Ltd., [1935] SCR 412; and
Lancia v. Park Dentistry, 2018 ONSC 751.
13. However, a statute may require some types of contracts to
be in writing. For example, some fixed-term contracts of
more than one year must be in writing by virtue of Statute
of Frauds legislation in effect in some Canadian provinces
(e.g., Ontario Statute of Frauds, RSO 1990, c. S.19), or by
virtue of the original 17th-century British Statute of Frauds
that applies under “received law.” See Campbell v. Business
Fleets Limited, [1954] OR 87 (CA); Smith v. Mills, 1913
CanLII 147 (Sask. CA); and Lavallee v. Siksika Nation,
2011 ABQB 49. The scope of the Statute of Frauds has been
read down by Canadian courts, which have ruled that a
fixed contract of more than one year is not governed by
the statute if it “could be performed in less than one year.”
The implied right to terminate a contract with “reasonable
notice” makes most contracts potentially terminable
within a year.
14. Rosas v. Toca, 2018 BCCA 191.
15. Globex Foreign Exchange Corporation v. Kelcher, 2011
ABCA 240. See also Techform Products Ltd. v. Wolda, 2001
CanLII 8604 (Ont. CA) at para 24; and McLean v. The
Raywal Limited Partnership, 2011 ONSC 7330.
16. An early case recognizing that a forbearance to exercise
the right to dismiss an employee for some period of time
constitutes new consideration is Maguire v. Northland
Drug Co. Ltd., [1935] SCR 412. An employee can also give
consideration in the form of a forbearance: Ciric v. Raytheon Canada Limited, 2008 BCCA 241 (employee’s
promise not to quit until laid off in exchange for a promise
to pay severance would constitute new consideration from
the employee).
17 Lancia v. Park Dentistry, 2018 ONSC 751. This case also
involves an interesting application of the Wronko decision
explained in Box 7.9.
18. Hill v. Peter Gorman Ltd., 1957 CanLII 393 (Ont. CA) at
132. See also Polard v. ARO Inc., 2016 BCSC 2277; Loyst v.
Chatten’s Better Hearing Service, 2012 ONSC 1653; Russo v.
Kerr, 2010 ONSC 6053; Wronko v. Western Inventory
Service Ltd., 2008 ONCA 327; Lin v. Ontario Teachers’
Pension Plan, 2016 ONCA 619; and Kafka v. Allstate Insurance Company of Canada, 2012 ONSC 1035. See also
Lancia v. Park Dentistry, 2018 ONSC 751 (suggesting that
it is sufficient for an employer to provide “reasonable
notice” of the modification rather than notice of
“termination”).
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CHAPTER 8
Expressed Terms of
Employment Contracts
LEARNING OBJECTIVES
CHAPTER OUTLINE
After reading this chapter, students will be able to:
I. Introduction 113
II. Interpreting “Ambiguous” Contract
Terms 114
III. Sources of Employment Contract
Terms 115
A. Restrictive Covenant Clauses 116
B. Termination of Contract
Clauses 118
IV. Chapter Summary 125
Questions and Issues for Discussion 125
Exercise 126
Appendix 127
Notes and References 129
• Explain how the parol evidence rule and the contra proferentem doctrine influence how
judges interpret employment contracts.
• Identify the three principal sources of employment contract terms.
• Understand how judges decide whether a restrictive covenant clause is legally enforceable.
• Explain the difference between a fixed-term, a fixed-task, and an indefinite-term
employment contract and how they are terminated.
• Identify and explain important situations in which the courts have refused to enforce
contract terms relating to the termination of employment contracts.
• Explain the “unconscionability” and “changed substratum” doctrines of contract law and
how they apply to termination of employment contracts.
• Explain how employment contracts can come to an end by agreement of the employee to
retire at a defined date, and how mandatory retirement clauses are now subject to the
prohibition on age discrimination found in human rights legislation.
I. Introduction
Once we have an offer, an acceptance, and mutual consideration, we have an employment contract. The contract may be oral or written. Some contracts are complicated and lengthy, but
many are quite sparse, like the one reproduced at the end of this chapter. Professor Hugh Collins
of Oxford University has described the employment contract as “incomplete by design,” by
which he means that the contracts are often left deliberately vague to allow for flexibility to deal
with the many contingencies that could arise over the life of the relationship.1 This chapter
introduces the employment contact, focusing on the sources of contract terms and on some
common terms found in written employment contracts and the legal issues that can arise in
relation to them.
Employment contract terms arise from three sources, as depicted in Figure 8.1:
• Expressed contract terms can be written and signed off on by both parties to create a
written employment contract, or they can be agreed to orally. For example, if the employer offers to hire the employee at a rate of $20 per hour and the employee accepts that
offer, then $20 per hour is the expressed contract term that governs the rate of pay,
whether or not it is written down.
expressed contract terms: Terms of a contract that the parties have explicitly agreed to, either orally or in writing.
113
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114 Part II The Common Law Regime
• Ancillary contract terms are found in secondary documents such as human resource
policy manuals, employee handbooks, company rules handbooks, and benefits handbooks. These documents are physically separate from the employment contract, but rules
and terms found in them can sometimes form part of the employment contract. It is
important to understand when that happens.
• Implied contract terms are read into contracts by judges to deal with situations that have
arisen and that are not specifically dealt with in any expressed contract terms. Implied
contract terms fill voids in the expressed contract terms. They are important in the common law of employment because most employment contracts are so sparse. The history
and development of implied contract terms in employment law is fascinating for what it
tells us about judges’ perceptions of the employment relationship over time.
This chapter will explore legal and policy issues related to expressed contract terms. In Chapter 9, we will consider ancillary and implied contract terms.
II. Interpreting “Ambiguous” Contract Terms
Let’s begin our discussion of employment contract terms by considering some important tools
that judges use as interpretative aids. Contract interpretation involves the search for the intention of the parties when they entered into the contract. Often that intention is clear from
expressed language used by the parties in a written contract. Therefore, a judge will always begin
the task of resolving employment contract disputes by reading the written contract, if one exists.
If the language provides a clear answer, then not much difficulty should arise. Thus, if an
employment contract includes a term providing that “the employee will be paid at a rate of $20
per hour worked,” then little dispute should exist about the hourly rate. The intention of the
parties on the question of the wage rate is unambiguous.
However, sometimes the terms of the written contract are not clear, and thus neither are the
parties’ intentions. Contract terms can be ambiguous, which means that they are capable of
multiple interpretations, all of which are possible. For example, while it might be clear that the
employee is to be paid $20 per hour, what the parties intended by the words “hour worked” in
the contract could give rise to disagreements. Consider a live-in nanny who both works and lives
at her employer’s home, caring for two small children. Occasionally, when the children are sleeping, the parents (i.e., the employer) go out for the evening, knowing that the nanny is home in
case the children wake up or something happens. While the parents are out, the nanny sometimes goes to sleep. Is the nanny “working” while she is sleeping? The answer will turn on how
a judge interprets the words “$20 per hour worked.” Did the parties intend “worked” to include
hours when both children and nanny are asleep?
When a contract term is clear (unambiguous), a judge will not usually permit the employer
or employee to present evidence that attempts to show they thought they were agreeing to something different than what the language says. In such instances, the judge is applying a rule of
evidence known as the parol evidence rule.2 According to this rule, a judge must decide what
a contract means by looking only at the clear words of the contract (i.e., they must “stay within
ancillary contract terms: Terms found in secondary documents, such as human resource policy manuals or employee handbooks, that have been incorporated into an employment contract by agreement of the employer and employee.
implied contract term: A default contract term invented by common law judges and read into an employment contract when
the written terms of the contract (if any) do not address the specific issue addressed by the implied term.
ambiguous contract term: A contract term capable of multiple interpretations.
parol evidence rule: A common law rule of evidence in which a judge is prohibited from hearing evidence that the parties
intended a meaning different than what is indicated in the clear language of the written contract.
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Chapter 8 Expressed Terms of Employment Contracts 115
the four corners of the contract”).3 The assumption is that the parties intended what they clearly
wrote down. So if the contract states that the hourly rate is $20 per hour, a judge will not listen
to evidence from the employer that in fact the employee agreed verbally to $15 per hour. The
contract is clear and unambiguous.
FIGURE 8.1 Sources of Employment Contract Terms
ANCILLARY
CONTRACT TERMS
EXPRESSED
CONTRACT TERMS
IMPLIED
CONTRACT TERMS
Terms in ancillary
documents that may be
incorporated into the
employment contract
Terms that are stated in
writing or explicitly
agreed to orally
Terms that are read into the
contract by judges to fill
voids in expressed
contract terms
(see Chapter 9)
CONTRACT
_________________
_________________
_________________
_________________
_________________
_________________
_________________
_________________
_________________
________
However, when a written contract term is ambiguous, a judge can hear evidence about what
the parties intended the contract language to mean. That evidence can include what the parties
said during negotiations of the contract term and how the contract term has been applied in the
past. Contract ambiguity creates an exception to the parol evidence rule. To deal with the challenge of interpreting ambiguous contract terms, judges have also applied the contra proferentem doctrine. This doctrine provides that, where a contract term is ambiguous (capable of
multiple meanings), the court will apply the interpretation that is most favourable to the party
that did not write the contract.4 In employment law, this usually means that the court will apply
the interpretation that is most favourable to the employee, since it is the employer that almost
always writes the contract.5 We will see some examples of how these interpretive tools are used
by judges to resolve employment contract interpretation disputes as we continue our discussion
of the employment contract.
III. Sources of Employment Contract Terms
The range of possible contract terms is as large as the imagination of the parties. In the appendix
at the end of this chapter you will find a sample employment contract with some commonly seen
contra proferentem doctrine: A rule of contract interpretation in which a judge interprets an ambiguous contract term in
the manner most favourable to the party that did not draft the contract.
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116 Part II The Common Law Regime
terms and a brief discussion of those terms. Disputes can, and often do, arise over the meaning
of written provisions or how those provisions should be applied to different factual situations.
We will encounter many expressed contract terms as we work our way through this text. For
now, we will highlight two of the most commonly litigated expressed contract terms: (1) restrictive covenant clauses and (2) termination of contract clauses.
A. Restrictive Covenant Clauses
Imagine that Christine is employed as a financial adviser by a large bank and has hundreds of
clients. One day she quits the bank and opens up her own financial advisory firm down the
street. She sends letters to all of her old clients from the bank to inform them of her move and
is pleased when 80 percent of them transfer their accounts from the bank to her new business.
Christine has done real business harm to her former employer. But has she done anything that
is legally wrong?
The answer depends on the language used in her former employment contract with the bank.
Some contracts include clauses known as restrictive covenants. Restrictive covenants impose
limitations on the actions of former employees. There are three main types:
1. A non-disclosure clause prohibits a former employee from disclosing information that
has proprietary value to the employer.
2. A non-solicitation clause prohibits a former employee from attempting to persuade the
employer’s customers to stop doing business with the employer and instead do business
with the employee.6
3. A non-competition clause prohibits a former employee from entering into a competing
business with the employer.
See Box 8.1 for examples of each of these clauses.
BOX 8.1 » TALKING WORK LAW
Sample Restrictive Covenant Clauses
• Non-disclosure clause: “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.”
• Non-solicitation clause: “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.”
• Non-competition clause: “The Employee agrees not to
establish a competing business or otherwise engage in
competition with the Employer within a 20-kilometre
radius of the Employer’s offices for a period of three
years from the date of the termination of this contract.”
Restrictive covenant clauses, particularly non-competition clauses, are controversial because
they put into tension two important and competing interests. On the one hand, there are important social and economic reasons why people ought to have the freedom to engage in whatever (non-criminal) commercial activities they wish. Christine needs to be able to support
herself, and if she is an excellent financial adviser, then the community of investors has an interest in her being able to sell her services. On the other hand, employers may have legitimate
restrictive covenant: A contract term that restricts the right of a former employee to engage in certain competitive practices
against their former employer.
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Chapter 8 Expressed Terms of Employment Contracts 117
business interests that are threatened if their former employees are free to go off and engage in
activities that pose a direct threat to those interests. Should the bank not be able to bargain a
promise from Christine that she will refrain from competing against it for some period of time
after she no longer works for the bank?
The Supreme Court of Canada has summarized the tension like this:
[R]estrictive covenants give rise to a tension in the common law between the concept of freedom of
contract and public policy considerations against restraint of trade.7
Judges balance these competing interests by applying their common law right to void contract terms that are contrary to public policy (public policy illegality).8 In exercising this discretion, judges start with a presumption that restrictive covenant clauses are generally unenforceable
because they are restraints on the right to engage in commercial activities (“restraint of trade”).
Judges have expressed concern that, especially in the employment context, employees are vulnerable because there is an imbalance of power on the side of employers. Employees could be
subjected to an oppressive restriction on their ability to earn a livelihood by a restrictive
covenant written into the contract by the more powerful employer.9 However, not all restrictive
covenant terms are void. Judges have carved out exceptions to permit “reasonable” covenants.
This approach was summarized in an 1894 British House of Lords decision:
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.10
In a leading decision from the 1978 case of Elsey v. J.G. Collins Insurance Agencies, the Supreme Court of Canada explained that a “reasonable”—and therefore lawful—restrictive
covenant is one that satisfies the following conditions:
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 healthy competition;
2. the covenant is reasonable as to geographical and temporal (time) scope, considering the specific type of work and the interests involved;
3. 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
4. the covenant is unambiguous, such that its scope is clear and understandable.11
Applying this test, the courts have been more accepting of non-solicitation and non-­
disclosure clauses than of more sweeping non-competition clauses. If the employer’s business
interests could have been protected by one of the former terms, then the court is likely to strike
down as unreasonable a broader non-competition clause that effectively prohibits the former
employee from working in the same field.12 If a non-solicitation clause would not adequately
protect the employer’s legitimate interests, then a judge will enforce a non-competition clause
only if the restrictions are reasonable in terms of how wide a geographical scope the ban covers
and the length of the ban.
In assessing whether a geographical and temporal scope is “reasonable,” the courts consider
the type of work involved and what is reasonable to protect the employer’s legitimate business
public policy illegality: A common law right of judges to void all or part of a contract because it is contrary to public policy.
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118 Part II The Common Law Regime
interests.13 Each case has to be assessed according to its own facts. The same geographical scope
and time limit may be reasonable in one circumstance and unreasonable in another. For example, in the case of Lyons v. Multari discussed in Box 8.2, the court found that a non-­
competition clause with a 5-mile radius and a three-year duration was reasonable for an oral
surgeon in Windsor, although the non-competition clause was still struck down as unreasonable
because a less intrusive non-solicitation clause would have sufficed to protect the employer’s
interest. However, in another decision, a two-year, 5-kilometre radius restriction applied to a
massage therapist in Winnipeg was ruled to be unreasonable in its geographical and temporal
scope.14
BOX 8.2 » CASE LAW HIGHLIGHT
The Enforceability of Restrictive Covenant Clauses
Lyons v. Multari
2000 CanLII 16851 (Ont. CA)
Key Facts: Lyons and Multari were surgeons. Lyons had worked
in Windsor for 25 years by the time he hired Multari to work
with him in the practice. They signed an employment contract
that included a restrictive covenant clause prohibiting Multari
from working as a surgeon anywhere within five miles of Lyons’s
office for a period of three years after the end of their employment contract. After 17 months Multari quit, and 6 months
afterward opened up a surgery practice within the five-mile
range. Lyons sued to enforce the restrictive covenant.
Decision: The restrictive covenant was void and unenforceable. First, the court ruled that Lyons had a proprietary interest
worthy of protection in the form of the relationships he held
with dentists who had regularly referred him patients over the
years. Second, for a dental surgeon who is reliant on referrals
from local dentists, a five-mile radius and three-year period are
not unreasonable. However, the non-competition clause failed
to satisfy the third condition of a reasonable restrictive covenant. The court ruled that a less intrusive “non-solicitation”
clause would have been sufficient to protect Lyons’s interests
in preserving his relationships with his regular referring
dentists.
Issue: Was the restrictive covenant term enforceable or void
as contrary to public policy?
Finally, it is important to note that apart from its reasonableness, a restrictive covenant will
not be enforced if the employer terminates the employment contract without providing the employee with the notice the contract required (a wrongful dismissal, discussed in Chapter 10).
Since that employer repudiated the contract, it cannot then attempt to seek to enforce the restrictive covenant.15
B. Termination of Contract Clauses
As explored in upcoming chapters, the default rule in the common law regime is that the parties
must provide one another with “reasonable notice” when they terminate the employment contract, and the courts decide how much notice is “reasonable” (see Chapters 9 and 10). However,
the parties can agree to waive this default requirement by including an expressed clause in the
employment contract that provides for termination of the contract without having to provide
“reasonable notice.”
wrongful dismissal: A type of lawsuit by an employee against a former employer alleging that the employer terminated their
contract without complying with the implied term in the contract requiring “reasonable notice.”
repudiation of contract: A breach of contract that demonstrates an intention by the party to treat the contract as at an end
and to no longer be bound by the contract.
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Chapter 8 Expressed Terms of Employment Contracts 119
BOX 8.3 » TALKING WORK LAW
Sample Termination of Contract Clauses
• Fixed-term clause: “This contract commences on January
1, 2020, and terminates on December 31, 2020.”
• Fixed-task clause: “The employer agrees to employ the
employee to dismantle and safely remove the shelving
at the three facilities owned by the employer identified
in Appendix A to this employment contract.”
• Notice of termination clause in an indefinite-term contract: “The employer may terminate this contract at any
time and for any reason by providing the employee
with three months’ notice, including benefits, which
may be working notice or pay in lieu of work.”
• Mandatory retirement clause: “The parties agree that
the employee will retire and this contract comes to an
end on the employee’s 65th birthday, unless the contract is terminated by one of the parties prior to this
date.”
For example, the parties can agree that the contract only lasts for a fixed period of time (a
fixed-term contract16), or that the contract expires upon completion of a defined task
(a fixed-task contract), or they can expressly agree to the amount of notice that is required to
terminate the contract and thereby remove the courts’ discretion to imply “reasonable notice”
(a notice of termination clause17). The parties might also agree to a mandatory retirement
clause that terminates the contract upon the employee reaching a specified age (although these
clauses may now run afoul of modern-day human rights legislation). Box 8.3 provides examples
of each of these types of contract clauses.
By agreeing at the outset when or how the contract can be terminated, the parties hope to
avoid litigation later about whether, and how much, reasonable notice is required. However, they
are not always successful in avoiding disputes. A significant percentage of employment-related
lawsuits that reach the courts involve disputes over fixed-term and, especially, notice of termination clauses.18 Let’s consider some legal issues that can arise in relation to expressed contract
terms that apply to the termination of contracts.
1. Termination by Fixed-Term or Fixed-Task Clause
A contract for a fixed term or fixed task ends when the term or task is done, and nothing more
is required to bring about the termination. The contract simply ends by virtue of the agreement
of the parties to end it at that moment, and no notice of termination is required.19 Some provinces have statutory restrictions on fixed-term contracts, but let’s leave those rather obscure
statutes aside.20 In the common law regime, the parties are assumed to be free to bargain a fixedterm or fixed-task contract if they wish. Since the right to notice of termination that is required
in the case of indefinite-term contracts is forfeited in the case of fixed-term and fixed-task
contracts, the courts have demanded very clear evidence that both parties intended this result.21
If any uncertainty exists about whether both parties intended to create a fixed-term or fixed-task
contract and thereby to eliminate the requirement for notice of termination, judges will revert
to implied “reasonable notice.”22 The case discussed in Box 8.4 provides an example of this
approach.
fixed-term contract: A contract with a specific defined end date.
fixed-task contract: A contract to perform a defined task that comes to an end when the task is complete.
notice of termination clause: A clause in an employment contract that specifies how much notice is required to be given
to the other party in order to lawfully terminate the contract.
mandatory retirement: A legal rule in a statute or contract that terminates an employment contract upon the employee
reaching a specified age.
indefinite-term contract: A contract that has no specified end date.
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120 Part II The Common Law Regime
BOX 8.4 » CASE LAW HIGHLIGHT
Abuse of Fixed-Term Employment Contracts
Ceccol v. Ontario Gymnastic Federation
2001 CanLII 8589 (Ont. CA)
Key Facts: Ceccol worked for Ontario Gymnastic Federation
(OGF) for some 16 years pursuant to 15 one-year fixed-term
contracts. Each contract stated that the contract was for one
year, but was also subject to “renewal” or termination sooner
if the employee acted improperly. After the 15th contract, OGF
informed Ceccol that the contract would not be further renewed, and Ceccol’s employment ended when that contract
expired. Ceccol sued for wrongful dismissal and sought damages arising from the failure of the employer to give her “reasonable notice” of termination.
Issue: Was the employment contract for an indefinite term
(therefore requiring reasonable notice of termination) or a
one-year fixed term (in which case the contract just came to
an end at the specified end date)?
Decision: The Ontario Court of Appeal ruled that the contract
was ambiguous. Although one clause said the contract was for
a one-year period, other parts of the contract indicated that
the contract could last more or less than that. Since the contract was ambiguous, the court was permitted to hear evidence about what the parties intended (the parol evidence rule,
explained earlier in this chapter). The witnesses’ testimony
indicated that when Ceccol was first hired, the intention and
understanding of the parties was that she was being employed
on a full-time, permanent basis, and not for a one-year fixed
contract. The Ontario Court of Appeal concluded with the following observations:
Fixed-term contracts of employment are … 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 other provisions in the
contract.
Ultimately, the court ruled that Ceccol should have received
16 months’ reasonable notice of termination, and therefore
ordered the employer to pay damages based on lost wages
for that amount of time (minus four months’ pay because Ceccol had not properly mitigated her loss; we discuss mitigation
in Chapter 14).
In Ceccol, the court ruled that the term clause was ambiguous and therefore relied on evidence of what the parties intended to happen to find that the contract was really one of indefinite
term. In the case of Alguire v. Cash Canada Group Ltd., the Alberta Court of Appeal found that
a term clause reading that the contract “is to run from February 1, 2002, to January 31, 2003”
demonstrated an “unequivocal and explicit” intent to form a fixed-term contract, even though
it was the last of several such one-year contracts.23 Thus, the lesson from Ceccol is not that the
courts will always treat a series of short-term contracts as a single, indefinite-term contract
requiring reasonable notice of termination, but that, depending on the facts of the case, they
may do so.
If either party terminates a fixed-term contract before the agreed-upon end date, that party
will be in breach of the contract unless the contract expressly permits an early termination.
Damages will then be assessed based on the loss the other party incurs as a result of being
deprived of the right to perform the remainder of the contract, which is usually equal to lost
wages and benefits for the remaining period.24 This scenario is considered in Box 8.5.
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Chapter 8 Expressed Terms of Employment Contracts 121
BOX 8.5 » CASE LAW HIGHLIGHT
Early Termination of a Fixed-Term Contract
Howard v. Benson Group Inc.
2016 ONCA 256
Key Facts: The parties entered into a fixed-term employment
contract for five years commencing in September 2012. Howard was terminated without cause after only 23 months. Clause
8.1 of the contract stated that the employer could terminate
the contract early, in which case “any amounts paid to the
employee shall be in accordance with the Employment Standards Act [ESA].” The employer gave Howard two weeks’ notice,
which was the minimum amount of notice required by the
ESA. Howard sued the employer and argued that he was entitled to damages based on lost wages for the remaining period of the fixed-term contract (37 months).
Issue: Is the employer required to pay Howard the equivalent
of his lost wages for the remainder of the five-year fixed-term
contract?
Decision: Yes. The Ontario Court of Appeal noted that it is
well-settled law that an employer that terminates a fixed-term
contract early is liable for damages based on the remaining
period of the contract, unless the contract allows for early
termination. Clause 8.1 of the contract was found to be ambiguous, and therefore the court applied the contra proferentem doctrine explained earlier in this chapter, ruling that the
interpretation most favourable to Howard would be applied.
Clause 8.1 is not clear whether notice is limited to the ESA
amount, or whether it simply states that whatever notice is
given will be at least equal to the ESA amount. Since the
contract did not include a clear term permitting the employer
to terminate the contract early, the employer was liable for
damages based on lost wages and benefits for a period of 37
months, equal to the remaining period of the five-year
contract.
Finally, note that if an employee remains employed beyond the end of a fixed term, the contract becomes one of indefinite term and is subject to the implied obligation to provide reasonable notice of termination.25
2. Termination According to a Contractual Notice Clause (and Potential
Pitfalls)
Many indefinite-term contracts include notice of termination clauses, such as the one reproduced in Box 8.3. Employers often include the clauses because they want to override the common law implied obligation to provide “reasonable notice” of termination, which is unpredictable
and potentially lengthy (see Chapter 10 to learn how courts determined reasonable notice). As
with fixed-term and fixed-task contracts, courts require notice of termination clauses to be
crystal clear in demonstrating the intention of the parties to replace “reasonable notice” with
something else.26 Any ambiguity will result in the court preserving implied “reasonable notice,”
but, assuming that the language is clear, a written notice of termination clause would normally
replace the implied term requiring reasonable notice. However, a number of legal issues can
arise that lead the courts to decline to enforce expressed notice of termination clauses. Three are
briefly considered here:
a. When the notice of termination clause violates statutory notice provisions.
b. When the notice of termination clause is “unconscionable.”
c. When changes to the employee’s job have rendered the original notice of termination
clause unenforceable so that the “changed substratum doctrine” applies.
a. When the Notice of Termination Clause Violates Statutory Notice Provisions
We saw in the case considered in Box 8.5 that employment standards legislation in Canada regulates the termination of employment contracts alongside the common law rules of contract. In
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122 Part II The Common Law Regime
particular, employment standards statutes establish a minimum amount of notice of termination
that employers must provide employees. Table 20.1 in Chapter 20 provides a quick look at notice
requirements in Canadian employment standards legislation, which we will consider in Part III
of the book. For now, it is sufficient to know that a contract term that contravenes an employment standards requirement is unlawful.
What happens if the notice of termination clause in a contract permits the employer to terminate the contract with less notice to the employee than required by employment standards
legislation? For example, what if an employment contract entitles an employer to terminate the
contract by providing the employee with four weeks’ notice when the applicable employment
standards legislation requires that at least six weeks’ notice be given to that employee? The Supreme Court of Canada was confronted with this scenario in the case discussed in Box 8.6.
BOX 8.6 » CASE LAW HIGHLIGHT
Illegal Notice of Termination Clauses
Machtinger v. HOJ Industries Ltd.
[1992] 1 SCR 986
Key Facts: The employment contract between Machtinger and
his employer, HOJ Industries, permitted HOJ to dismiss Machtinger without notice. That term violated the Ontario Employment Standards Act (ESA), which required that Machtinger
receive at least four weeks’ notice of termination. In fact, HOJ
recognized the error and paid Machtinger four weeks’ pay in
lieu of notice and thereby complied with the ESA. However,
Machtinger sued for wrongful dismissal, arguing that he was
entitled to a much longer period of implied “reasonable
notice.”
Issue: Does the ESA minimum notice period or the implied
reasonable notice period apply when a contract term allows
less notice of termination than required by the ESA?
Decision: The Supreme Court of Canada ruled that the illegal
clause was void and is replaced by the implied term requiring
reasonable notice of termination. The court explained that the
implied obligation to provide reasonable notice is a “rebuttable presumption,” meaning that it applies unless the written
contract includes clear language that some other period of
notice applies. Such a clause existed here, but it was contrary
to the ESA, rendering it legally void. In deciding how the law
should deal with this situation, the court emphasized “policy
considerations.” It set out the considerations noted in Box 7.7,
which emphasize the vulnerability of employees. It then described the ESA as a “remedial statute,” the purpose of which
is to extend protections to as many employees as possible.
With that purpose in mind, the court indicated that the
proper interpretation is to require reasonable notice when
contract terms violate the ESA, for the following reason:
If the only sanction which employers potentially
face for failure to comply with the [ESA] minimum
notice periods prescribed by the Act is an order that
they minimally comply with the Act, employers will
have little incentive to make contracts with their
employees that comply with the Act. As Swinton and
Etherington suggest, most individual employees are
unaware of their legal rights, or unwilling or unable
to go to the trouble and expense of having them
vindicated. Employers can rely on the fact that many
employees will not challenge contractual notice
provisions which are in fact contrary to employment
standards legislation. Employers such as the present
respondent can contract with their employees for
notice periods below the statutory minimum, knowing that only those individual employees who take
legal action after they are dismissed will in fact receive the protection of the minimum statutory notice provisions.
Therefore, the court ruled that a contract clause that violates employment standards minimum notice requirements
will be replaced by the common law presumption of reasonable notice. In this case, applying the Bardal factors we will
discuss in Chapter 10, the amount of reasonable notice was
set at seven months.
In the passage from Machtinger cited in Box 8.6, the Supreme Court of Canada acknowledged
that employers usually write employment contracts and that most employees agree to them
“unaware of their legal rights.” This is an important admission by the court, one that has influenced modern interpretations of employment contracts. Although the common law is still
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Chapter 8 Expressed Terms of Employment Contracts 123
premised on the notion of “freedom of contract,” the court also acknowledges that employees
often lack information about what they are agreeing to.27 And since most employees lack the
power to negotiate up from the terms in the employer’s opening offer and the financial resources
to hire lawyers to enforce the contract, they are vulnerable. These insights contributed to the
court’s decision to choose the interpretive option that afforded the greatest level of protection
for the employee.
A few final points need to be made about notice of termination clauses that conflict with
employment standards legislation flowing from the Machtinger decision. First, notice of termination clauses can run afoul of employment standards laws even if the employer ultimately complies with the statute. In the Machtinger case, the employer gave the employee four weeks’ notice
as required by the employment standards legislation, but that did not matter because the contract language itself allowed the employer to terminate the contract with no notice.28 The employer cannot “cure” an illegal clause by giving the employee more than the clause requires.
Second, a notice of termination that could at some point in the future permit the employer to
terminate the employee in a manner that would violate employment standards legislation is
unlawful, even if at the time the employee is terminated the employer complied with the legislation. For example, if the contract permits the employer to terminate the employee with two
weeks’ notice, and at the time of the termination the employee is only entitled to two weeks’
notice under the employment standards legislation, then the employer would not be violating
the legislation or the contract by providing two weeks’ notice. However, because employment
standards’ notice increases over time in some jurisdictions (see Table 20.1), once the employee
is employed longer than, say, five years, the contract term permitting termination with two
weeks’ notice may become illegal; the legislation may require five weeks’ notice. Since the
enforceability of the notice of termination clause is assessed as of the date the contract is
formed, the term permitting termination with two weeks’ notice would be deemed
unenforceable.29
Third, the notice of termination clause must not offend the employment standards legislation
in any manner. Employment standards laws require not just that employers provide notice to
the employee of a specified amount, but also that the employer continue to provide any benefits
coverage that the employee was entitled to throughout that notice period. Therefore, an employment contract clause that requires that the employer provide the amount of notice required by
the employment standards legislation and nothing else would violate the legislation and be rendered void as well.30
Finally, although we will discuss the law of damages more fully in Chapter 14, it is useful to
flag that the inclusion in a contract of a notice of termination clause can have important implications for the rules involving the duty to mitigate damages. As we will learn, employees are
required to “mitigate” the damages caused by an employer’s breach of the contract. In the case
of a breach of the implied duty to give reasonable notice of termination, this means they need
to take all reasonable steps to find another job. Income earned from their new job can then be
deducted from the amount of damages their former employer would otherwise be required to
pay. However, if the contract includes an expressed notice of termination clause, the duty to
mitigate may not apply.31 We will return to this point when we look at damages.
b. When the Notice of Termination Clause Is “Unconscionable”
Judges can refuse to enforce a contract term they believe is grossly unfair, or “unconscionable.”32
However, since ignoring the agreement of the parties runs so contrary to the concept of freedom
duty to mitigate: A legal obligation on the victim of a breach of contract by the other party to make reasonable efforts to
limit the amount of damages suffered as a consequence of the breach.
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124 Part II The Common Law Regime
of contract, judges have been cautious in applying the unconscionability doctrine. For a term
of a contract to be set aside as unconscionable, all of the following elements must be present:
1. A grossly unfair transaction;
2. A lack of independent legal advice or other suitable advice;
3. An overwhelming imbalance in bargaining power caused by the victim’s ignorance of
business, illiteracy, ignorance of the language of the bargain, blindness, deafness, illness,
senility, or similar disability; and
4. The other party knowingly taking advantage of this vulnerability.33
In the case of Stephenson v. Hilti (Canada) Ltd., a dismissed employee agreed to accept three
months’ pay when reasonable notice would have been between 10 and 12 months.34 The employee sued, seeking damages for the failure of the employer to provide the longer period of
reasonable notice, arguing that his agreement to accept three months’ pay was unenforceable
due to unconscionability. The court agreed. It ruled that the employee was suffering from
depression at the time he agreed to three months’ pay, and that he believed if he did not accept
the deal he would incur dire financial repercussions. The three-month payment was substantially below what a court would find to be reasonable notice. However, the employer paid little
attention to this point, or to the well-being of the employee, and instead based its offer on a
substandard period of notice to benefit its own economic interests. This approach diverged from
community standards of commercial morality. The court set aside the three-month period and
assessed damages based on a period of 11 months’ notice.
c. When the “Changed Substratum Doctrine” Applies
Finally, if an employee’s job functions have changed substantially since the date they originally agreed to a notice of termination clause, a court may refuse to enforce the original notice
term. This refusal involves the application of what is known as the changed substratum
doctrine. Imagine that Amanda was hired as a McDonald’s cashier in 1990 and signed a
standard form one-page contract saying that the employer can dismiss her at any time by
giving her the minimum amount of notice required by employment standards laws. Amanda
is a fantastic worker and, over time, is promoted up the ranks. When she is ultimately fired
in 2015, she is McDonald’s regional manager for eastern Canada, responsible for hundreds of
stores, but the employer provides her with just eight weeks’ notice, as required by the employment standards laws. When an employee has been assigned much greater job responsibility
over time, and the original contract does not contemplate this outcome, the court might rule
that the “substratum” of the original employment contract has disappeared. In that case, the
notice term in that contract is unenforceable, and reasonable notice is implied in its place.35
3. Termination by a Retirement Clause
The mandatory retirement clause reproduced in Box 8.3 does not prevent the contract from
being terminated earlier for cause or with notice, but if the contract is still in effect on the
employee’s 65th birthday, it comes to an end by virtue of this clause. A mandatory retirement
unconscionability doctrine: A contract or contract term that a court refuses to enforce because it is a result of inequality
of bargaining power that was exploited by the more powerful party to obtain a contract that is substantially unfair considering
community standards of commercial morality.
changed substratum doctrine: A legal doctrine in employment law in which an employee’s job responsibilities have changed
so substantially from the time the original contract was executed that the courts rule the original “substratum” of the contract
has ceased to exist. In this case, the court may refuse to enforce a contract them in the original contract.
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Chapter 8 Expressed Terms of Employment Contracts 125
clause reflects the agreement of the parties that the contract will end upon the happening of a
future, predictable event—the employee turning 65.
Mandatory retirement clauses used to be common in Canada. For some workers, retirement
is something to look forward to. For many others, retirement is a scary prospect full of uncertainty and financial instability, if not outright poverty. These workers would prefer to keep working, either because they lack sufficient retirement savings or because they value the personal
fulfillment and social interaction that working provides. The average year in which Canadians
retire has risen over the years: in 1998, it was approximately 60.9 years of age, while in 2018 the
average age of retirement was 63.8.36 A recent poll found that about 30 percent of Canadians
aged 18 to 34 have no retirement savings at all.37 People are working longer and having a harder
time preparing for life after work.
Concern about elder poverty and work-based discrimination based on age has led governments to legislate retirement in a number of ways, including mandatory deductions to the
Canada Pension Plan and prohibitions against discrimination based on age in human rights
legislation. Beginning in the early 2000s, Canadian governments began to abolish mandatory
retirement by amending human rights legislation to make forced retirement clauses unlawful
age discrimination. As a result of this change within the regulatory regime, mandatory retirement clauses in employment contracts are in most cases now unlawful in Canada, with some
exceptions. For example, mandatory retirement may be permitted when retirement at a specific
age is a requirement of a “bona fide” pension plan scheme (see Chapter 23).38 Other than when
these narrow exceptions apply, it is now illegal in Canada for an employment contract to be terminated based purely on the employee reaching a specific age.
IV. Chapter Summary
This chapter examined employment contract terms. It opened with a quick overview of interpretive devices used by judges to resolve complex contract disputes. There are three principal
sources of contract terms: (1) expressed contract terms, (2) ancillary contract terms, and (3)
implied contract terms. This chapter examined the first of these. It would be impossible to discuss every possible term that could appear in an employment contract, so we have focused on
key expressed contract terms that produce the most litigation: (1) restrictive covenant clauses
and (2) contract clauses that define how and when employment contracts terminate. In Chapters
10 to 15, we return to the topic of termination of contracts when we explore termination with
reasonable notice, summary dismissal, constructive dismissal, and resignations.
QUESTIONS AND ISSUES FOR DISCUSSION
1. Describe two legal tools used by judges to help them interpret an ambiguous contract term.
2. Identify and describe three types of restrictive covenant terms. What are the conditions in
which a court will rule that a restrictive covenant is lawful?
3. Why do judges often not enforce restrictive covenant clauses in employment contracts?
4. If an employment contract term specifies that the contract operates from January 1, 2020,
to December 31, 2020, must the employer provide notice of termination to terminate the
contract?
5. On what basis did the court refuse to enforce the fixed-term contract clause in Ceccol v.
Ontario Gymnastic Federation (Box 8.4)?
6. Explain the tests applied by the courts when considering the following two arguments for
non-enforceability of a notice of termination clause: (1) unconscionable contract term and
(2) the changed substratum doctrine.
7. How do the courts in the common law regime deal with an employment contract term that
permits termination of the contract by provision of less notice than required by employment standards legislation?
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126 Part II The Common Law Regime
APPLYING THE LAW
1. Last year, County Beer Company hired Bridget Dortman as a beer maker after she graduated from college
with a diploma in Brewing Sciences. As a beer maker,
Bridget learned the formula and process used to make
the popular County Beer Ale. One day, Amanda Wellington, the new human resources manager, noticed
when going through personnel files that there was no
signed employment contract for Bridget. She asked
the owners about this, and they told her they must
have forgotten to get Bridget to sign. So Amanda prepared a standard employment contract and presented
it to Bridget to sign. Bridget read the contract and noticed a non-competition clause (Article 8), which stated that Bridget could not work for another beer
company in the province for a year after her employment ended with County Beer. Bridget thought that
was unfair, but because Amanda told her that all
employees must have a signed contract, she signed
the contract. Two years later, Bridget quit County
Beer and accepted a job as a beer maker at Northern
Brewery, a small micro-brewery located in the north
of the province, nearly 500 kilometres from County
Beer.
Assume that County Beer launches a lawsuit against
Bridget for breaching the non-competition clause in
the employment contract and that Bridget comes to
you for legal advice. What would you argue on behalf
of Bridgett in her defence?
2. Taylor is the human resources manager at a mediumsized retail company. Her boss tells her to prepare a
standard form employment contract that will ensure
the employer is not required to give employees “reasonable notice” if the employer decides to terminate
the contract, because the boss has learned that “rea-
sonable notice” can be very lengthy. Taylor drafts up
the following three contract terms. Drawing on the
materials in this chapter that consider notice of termination clauses, explain whether the terms would
likely achieve the result desired by the employer if an
employee later sued the employer and argued that
they are entitled to “reasonable notice”:
A. The employer can terminate this contract at any
time by providing the employee with two weeks’
notice, which can be working notice or pay in lieu
of notice.
B. The employer can terminate this contract at any
time by providing the employee with the amount
of notice required by employment standards legislation. The employer shall not be obliged to make
any other payments to the employee.
C. The employer can terminate this contract at any
time by providing the employee with the full entitlements to which the employee is entitled under
employment standards legislation.
3. Assume that Taylor opts for clause B in the preceding
question. Later on, she terminates an employee who
had five years’ service and had signed a contract that
included that clause. By that point, Taylor realizes that
the two weeks’ notice in clause B is less than the five
weeks required by employment standards legislation
in her province to terminate an employee with five
years’ service. Therefore, Taylor provides the employee
with five weeks’ notice rather than the two weeks outlined in the contract. However, the employee nevertheless sues the employer seeking a much longer
period of “reasonable notice.” Do you think the employee will succeed?
EXERCISE
Dozens of cases examine whether a restrictive covenant clause in an employment contract is
“reasonable,” applying the tests discussed in this chapter. Try the following legal research
exercise:
1. Go to the CanLII home page: <https://www.canlii.org>.
2. Choose a jurisdiction (province) or, by default, search all of Canada. In the “Document
text” search box, type “employment contract” and “restrictive covenant” and “reasonable.”
3. Choose one or two of the cases that result from this search and answer the following
questions:
a. What type(s) of restrictive covenant clauses were at issue in the case? What does the
covenant restrict the employee from doing?
b. Does the judge refer to the vulnerability of the employee?
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Chapter 8 Expressed Terms of Employment Contracts 127
c. Does the court rule that the covenant is reasonable or unreasonable?
d. Briefly explain how the court came to its conclusion.
If you read enough of these cases, you can begin to get a clearer idea of how judges are likely
to interpret a restrictive covenant clause.
APPENDIX
Sample Employment Contract
Note the careful use of the words
“consideration” and “valuable
consideration.” (See the discussion
of consideration in Chapter 7.)
This clause refers specifically to an
“Employee Handbook” and clearly
states that the handbook is part of
the contract.
THIS AGREEMENT made as of the 15th of August 2020, between County Beer
Company (the Employer) and Jane Smith (the Employee).
This clause also gives the employer
the right to modify the Employee
Handbook and the employee’s job
duties (see Chapter 7) without
triggering a constructive dismissal
(see Chapter 13).
IN CONSIDERATION of the promises and other good and valuable consideration (the
sufficiency and receipt of which are hereby acknowledged) the parties agree as follows:
Even absent this sentence, the
employee would have an implied
obligation to perform competently
and faithfully (see Chapter 9).
This clause must be compliant
with any vacation entitlements in
applicable employment standards
legislation (the same is true for the
wage rate stated in the
Compensation clause). These
employment standards laws are
considered in Part III of this text.
WHEREAS the Employer desires to obtain the benefit of the services of the Employee
as a Beer Maker, and the Employee wishes to be employed as a Beer Maker.
1. Employment and Modifications
The Employee agrees that she will at all times faithfully, industriously, and to the best of her
skill, ability, experience and talents perform all of the duties required of her position. In carrying
out these duties and responsibilities, the Employee shall comply with the Employee Handbook,
which has been provided to the Employee prior to the execution of this contract and forms part
of this employment contract. The Employee agrees and understands that the Employer may
modify the terms of that Handbook from time to time and that such modification is within
the Employer’s contractual rights. It is also understood and agreed to by the Employee that her
assignment, duties and responsibilities and reporting arrangements may be changed by the
Employer in its sole discretion without amounting to a breach of this contract or a constructive
dismissal.
2. Compensation
(a) As full compensation for all services provided, the Employee shall be paid at an annual
rate of $40,000. This amount shall be paid out to the Employee proportionally on a bimonthly basis by means of direct deposit to the Employee’s personal bank account. Such
payments shall be subject to normal statutory deductions by the Employer.
(b) The salary mentioned in paragraph (2)(a) shall be reviewed on an annual basis. Any future
increases to this pay rate are within the sole discretion of the Employer.
3. Vacation
The Employee shall be entitled to vacations in the amount of two weeks per annum.
This clause does not indicate any
specific level or content of benefits.
It says simply that insofar as the
employer continues to purchase
a Health Plan for its employees,
Jane Smith (the employee) shall
be covered by it.
This clause overrides the implied
duty to provide reasonable notice
of termination to short-term
“probationary employees.” It is
subject to any notice of termination
requirements in applicable
employment standards legislation.
4. Benefits
The Employer shall at its expense provide the Employee with coverage under the Health Plan
that is currently in place or as may be in place from time to time. The Employer may, at its sole
discretion, amend or cancel the Health Plan or any benefits provided by it without breaching this
contract.
5. Probation Period
It is understood and agreed that the first ninety (90) days of employment shall constitute a
probationary period during which period the Employer may, in its absolute discretion, terminate
the Employee’s employment, for any reason without notice or cause.
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128 Part II The Common Law Regime
In some jurisdictions, employment
standards legislation does not
require employees to give notice of
termination (as we will see in Part III).
Provided this term does not conflict
with employment standards
requirements, it would supplant the
implied duty for the employee to
provide reasonable notice of
termination (see Chapter 15). In
practice, few employers go to court
to enforce this term because the
damages they suffer from an
employee quitting without notice
are usually low (see Chapter 15).
This “summary dismissal” term
permits termination of an employee
contract without notice for cause.
The courts are often asked to
interpret these types of “cause”
terms. (See Chapter 12 for what
constitutes “cause.”)
By specifying an amount of notice
—the amount required by
employment standards legislation—
this term attempts to oust the
common law implied contract term
requiring “reasonable notice” of
termination, which would usually
be much longer than the
employment standards amount
(see Chapter 10).
The purpose of this clause is to
demonstrate to a court that no
undue duress was placed on the
employee at the time of signing and
that the contract was based on
informed consent.
This restrictive covenant clause
includes both a non-disclosure
and a non-competition component.
The non-competition component
could probably be challenged
successfully by the employee as
“unreasonable” if the employer later
attempted to enforce it on the basis
that a 100-kilometre restriction for
a beer maker is probably overbroad.
6. Performance Reviews
The Employee will be provided with a written performance appraisal at least once per year, and
said appraisal will be reviewed at which time all aspects of the assessment can be fully discussed.
7. Termination
(a) The Employer may at any time terminate this agreement and her employment by giving
two weeks’ written notice to the Employer.
(b) The Employer may terminate this agreement and the employment of the Employee at any
time, without notice or payment in lieu of notice, for sufficient cause.
(c) The Employer may terminate the employment of the Employee at any time by providing
the Employee with written notice equivalent to the length of period required by applicable
employment standards legislation along with any statutorily required benefits.
8. Independent Legal Advice
The Employee acknowledges that the Employer has provided the Employee with a reasonable
opportunity to obtain independent legal advice with respect to this agreement, and that either:
(a) the Employee has had such independent legal advice prior to executing this agreement, or
(b) the Employee has willingly chosen not to obtain such advice and to execute this
agreement without having obtained such advice.
9. Restrictive Covenant
The Employee shall not work for another beer company within 100 kilometres for a period of one (1)
year after this contract is terminated by either party. The Employee shall not disclose at any time
during or after this employment contract terminates any confidential information obtained during
employment with the Employer, including brewing formulas or ingredients.
10. Entire Agreement
This agreement contains the entire agreement between the parties, superseding in all respects any
and all prior oral or written agreements or understandings pertaining to the employment of the
Employee by the Employer.
Name of Employee
Signature of Employee
Date
Name of Employer Representative/Title
Signature of Employer Representative
Date
This clause is intended to avoid
allegations of “negligent
misrepresentation” arising from
representation comments made by
one of the parties prior to the
execution of the contract
(see Chapter 6).
Sample for educational purposes only. Not intended to serve as a template.
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Chapter 8 Expressed Terms of Employment Contracts 129
NOTES AND REFERENCES
1. H. Collins, The Employment Contract, 2nd ed (Oxford:
Oxford University Press, 2010) at 10.
2. P. Perell, “The Ambiguity Exception to the Parol Evidence
Rule” (2001) 36 Can Bus LJ 21; G.H.L. Fridman, The Law
of Contract in Canada, 4th ed (Toronto: Carswell, 1999) at
480. However, see the discussion in Sattva Capital Corp. v.
Creston Moly Corp., 2014 SCC 53, clarifying that the “parol
evidence rule” does not exclude evidence of “surrounding
circumstances” known to the parties or that ought to have
been known to the parties when the contract was formed
as an aid to interpreting contracts. It is too soon to know
how, if at all, this decision will change the way the courts
deal with the interpretation of employment contracts.
3. For a good discussion of the “parol evidence rule” in the
employment context and the many exceptions to the rule
that have been developed by courts, see King v. Operating
Engineers Training, 2011 MBCA 80.
4. See Johnson v. Top-Co LP, 2009 ABQB 731; Ceccol
v. Ontario Gymnastic Federation, 2001 CanLII 8589 (Ont.
CA); Oudin v. Le Centre Francophone de Toronto, 2015
ONSC 6494; Movati Athletic (Group) Inc. v. Bergeron,
2018 ONSC 7258; and Stefanec v. Robert Half Canada Inc.,
2000 BCSC 1224 (notice of termination clause in contract
is ambiguous, so court applies interpretation most favourable to employee). The doctrine is not applied if the employee played a meaningful role in the negotiation of the
contract; it is reserved for ambiguous clauses in contracts
drafted solely, or at least primarily, by the employer. See
also McClelland & Stewart Ltd. v. Mutual Life, [1981] 2
SCR 6; and Gill v. Navigate Capital Corp., 2014 BCCA 462
(the contra proferentum doctrine does not apply to oust a
well-known standard implied term in employment
contracts).
5. See, e.g., Greenberg v. Meffert, 1985 CanLII 1975 (Ont.
CA); but see Foreman v. 818329 Ontario Limited, 2003
CanLII 57401 (Ont. CA) (ambiguity is interpreted against
an employee who had drafted the contract).
6. For discussion of how courts treat non-solicitation clauses,
see Elsley v. J.G. Collins Ins. Agencies, [1978] 2 SCR 916;
and MD Physician Services Inc. v. Wisniewski, 2018 ONCA
440. Non-solicitation clauses are interpreted narrowly:
Veolia ES Industrial Services Inc. v. Brulé, 2012 ONCA 173
(bidding on a public tender is not solicitation); IBM
Canada Ltd. v. Almond, 2015 ABQB 336; IT/Net Inc. v.
Doucette, 2007 ONCA 52 (accepting a work offer from
former client is not solicitation); Planet Paper Box Group
Inc. v. McEwan, 2018 ONSC 6991.
7. Shafron v. KRG Insurance Brokers (Western), 2009 SCC 6 at
para 16. See also EMW Industrial Ltd. v. Good, 2019 SKQB
47; Knight Archer Insurance Ltd. v. Dressler, 2019 SKCA 24;
and Barton Insurance Brokers Ltd. v. Irwin, 1999 BCCA 73.
8. See the discussion of public policy contract illegalities in
R.A. Buckley, Illegality and Public Policy (London: Sweet &
Maxwell, 2002); J. McCamus, The Law of Contracts, 2nd ed
(Toronto: Irwin Law, 2012) at chapter 12; S. Bhalloo &
A. Parma, “Restrictive Covenants: When the Honeymoon Ends” (2016) 53 Alta L Rev 643, online: <http://
www.canlii.org/t/6sb>; and O. Lobel, Talent Wants to Be
Free: Why We Should Learn to Love Leaks, Raids, and Free
Riding (New Haven: Yale University Press, 2013).
9. See the comments of the Supreme Court of Canada in
Shafron v. KRG Insurance Brokers, supra note 7 at para 22;
and Elsley v. J.G. Collins supra note 6 at 924: “A different
situation, at least in theory, obtains in the negotiation of a
contract of employment where an imbalance of bargaining
power may lead to oppression and a denial of the right of
the employee to exploit, following termination of employment, in the public interest and in his own interest, knowledge and skills obtained during employment.” See also
IRIS The Visual Group Western Canada Inc. v. Park, 2017
BCCA 301.
10. Nordenfelt v. Maxim Nordenfelt Guns & Ammunition,
[1894] AC 535 (HL), cited with approval more recently by
the Ontario Court of Appeal in Lyons v. Multari, 2000
CanLII 16851 (Ont. CA).
11. Elsley v. J.G. Collins, supra note 6. The fourth factor was
discussed explicitly in the more recent decision Shafron v.
KRG Insurance Brokers, supra note 7, where the Supreme
Court of Canada ruled that a restrictive covenant that is
ambiguous will not be considered reasonable. In that case,
the ambiguous term restricted competition in the “Metropolitan City of Vancouver.” See also on this point Globex
Foreign Exchange Corporation v. Kelcher, 2011 ABCA 240;
and Rhebergen v. Creston Veterinary Clinic Ltd., 2014
BCCA 97 (clause requiring a former employee to pay a
large fee if they set up a competing business within three
years was ruled an unreasonable restraint of trade on the
basis of ambiguity).
12. H.L. Staebler Company v. Allan, 2008 ONCA 576; Mason v.
Chem-Trend Limited Partnership, 2011 ONCA 344; Thienes
v. Godenir, 2011 SKQB 271; Phoenix Restorations Ltd. v.
Brownlee, 2010 BCSC 1749; Edward Jones v. Mirminachi,
2011 BCSC 295; Lyons v. Multari, supra note 10; Westpac
Solutions Ltd. v. Morgan, 2018 BCSC 976; Telus Communications Inc. v. Golberg, 2018 BCSC 1825; Ceridian Dayforce
Corporation v. Daniel Wright, 2017 ONSC 6763; Kohler
Canada v. Porter, 2002 CanLII 49614 (Ont. Sup Ct J).
13. See Kohler Canada v. Porter, supra note 12. (non-competition clause covering all of North America is unreasonable);
MacMillan Tucker MacKay v. Pyper, 2009 BCSC 694 (prohibition on lawyer from working within 5 miles of old law
firm for three years is unreasonable); and Donaldson
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130 Part II The Common Law Regime
Travel Inc. v. Murphy, 2016 ONCA 649 (no time limit at all
is unreasonable).
14. Steinke o/a Muscle Mechanics Massage Therapy v. Barrett,
2012 MBQB 49. See also Renfrew Insurance Ltd. v. Cortese,
2014 ABCA 203 (six-month, 60-kilometre non-­
competition restriction is reasonable in the case of insurance salespeople).
15. The origins for the principle that a wrongfully dismissed
employee is relieved of their obligations under a restrictive
covenant clause is the case of General Billposting Co. Ltd. v.
Atkinson, [1909] AC 118 (HL). See also Globex Foreign
Exchange Corporation v. Kelcher, supra note 11; Cohnstaedt
v. University of Regina, 1994 CanLII 4566 (Sask. CA);
961945 Alberta Ltd (Servicemaster of Edmonton Disaster
Restoration) v. Meyer, 2018 ABQB 564; and Ims Health
Canada Inc. v. Harbin, 2014 ONSC 4350.
16. Chambly (City) v. Gagnon, [1999] 1 SCR 8; and Ceccol v.
Ontario Gymnastic Federation, supra note 4.
17. See the discussion in Machtinger v. HOJ Industries Ltd.,
[1992] 1 SCR 986 and Chapter 9.
18. Ibid. See also B. Etherington, “The Enforcement of Harsh
Termination Provisions in Employment Contracts: The
Rebirth of Freedom of Contract in Ontario” (1990) 35
McGill LJ 459.
21. Dwyer v. Mark II Innovations Ltd., 2006 CanLII 9406 (Ont.
CA); Foreman v. 818329 Ontario Limited, supra note 5;
Gibson v. Alberta, 2013 ABQB 695; Ceccol v. Ontario Gymnastic Federation, supra note 4; Kerzner v. American Iron &
Metal Company Inc., 2018 ONCA 989; and Pakozdi v. B &
B Heavy Civil Construction Ltd., 2016 BCSC 992.
22. Machtinger v. HOJ Industries Ltd., supra note 17; and
Christensen v. Family Counselling Centre of Sault Ste. Marie
and District, 2001 CanLII 4698 (Ont. CA).
23. Alguire v. Cash Canada Group Ltd., supra note 19.
24. Covenoho v. Pendylum Ltd., 2017 ONCA 284; Lovely v.
Prestige Travel Ltd., 2013 ABQB 467; Mohamed v. Information Systems Architects Inc., 2018 ONCA 428; Howard v.
Benson Group Inc. (The Benson Group Inc.), 2016 ONCA
256; Spark v. Generex Pharmaceuticals Inc., 2003 CanLII
52138 (Ont. CA); Canadian Ice Machine Co. v. Sinclair,
[1955] SCR 777; Martins v. 601360 N.B. Inc., 2010 NBCA
16; Anderson v. Brouwer Claims Canada & Co. Ltd., 2002
BCSC 1043; Chilagan v. Island Lake Band No. 161, 1994
CanLII 4787 (Sask. QB); Gainer’s Inc. v. Paquin, 1991
ABCA 132; and Thompson v. Cardel Homes Limited Partnership, 2014 ABCA 242 (contract provided that in the
event of early termination of a one-year fixed-term contract, the employer would pay 12 months’ pay). Note also
that there is no duty to mitigate damages owing based on
the remainder of a fixed-term contract, a point that will be
discussed in Chapter 14.
19. Chambly (City) v. Gagnon, supra note 16; Alguire v. Cash
Canada Group Ltd., 2005 ABCA 387; Ceccol v. Ontario
Gymnastic Federation, supra note 4; and Dombrowski v.
Board of Governors of Dalhousie University and College,
1974 CanLII 1290 (NSSC). Statutory notice of termination
is usually also not required in the case of fixed-term contracts. For example, with a few special exceptions (listed
in Regulation 288/01, s. 2(2)), the notice of termination
and termination pay provisions in the Ontario Employment Standards Act do not apply to contracts for a fixed
term or task: Regulation 288/01, s. 2(1)1.
26. See Nemeth v. Hatch Ltd., 2018 ONCA 7 (noting that the
contract language need not expressly state that the parties
agree to replace implied reasonable notice; it is sufficient if
that intention “can be readily gleaned from the language”).
20. Provincial Statutes of Frauds legislation, or the original
British statute from 1677 named An Act for Prevention of
Frauds and Perjuries, made applicable in Canada through
“received law,” prohibits fixed-term contracts of longer than
one year that are not in writing. Provincial Statutes of
Frauds legislation remain in effect in Ontario, Nova Scotia,
Prince Edward Island, and New Brunswick. Courts have
sometimes struck down fixed-term employment contracts
of greater than one year applying this law: Smith v. Mills,
1913 CanLII 147 (Sask. CA). However, courts have weakened the application of the Statute of Frauds by ruling that it
does not apply to employment contracts that could be performed within a year or that could be terminated by the
employee within one year, which is most employment contracts: Annand v. Peter M. Cox Enterprises Ltd., 1992 CanLII
4666 (NSSC); Campbell v. Business Fleets Limited, [1954]
OR 87 (CA); and Lavallee v. Siksika Nation, 2011 ABQB 49.
28. See also Wood v. Fred Deeley Imports Ltd., 2017 ONCA 158
(clause limited the employer to paying notice pay only,
while the ESA required continuation of benefits during the
notice period. Even though the employer continued benefits coverage, the clause itself was illegal); and Wright v. The
Young and Rubicam Group of Cos. (Wunderman), 2011
ONSC 4720.
25. Hale v. Innova Medical Ophthalmics Inc., 2018 ONSC 1551;
Messer v. Barrett Co. (1927), 1 DLR 284 (Ont. CA); Hague
v. St. Boniface Hospital, 1936 CanLII 193 (Man. QB); and
Duxbury v. Training Inc., 2002 ABPC 24.
27. Studies have demonstrated that, contrary to the assumption of the neoclassical perspective’s axioms discussed in
Chapter 3, workers have a very poor understanding of
their legal rights in employment and information asymmetries are endemic in the employment relationship. See,
e.g., J. Stiglitz, “Employment, Social Justice and Societal
Well-Being” (2002) 141 Intl Lab Rev 9; and P. Kim, “Bargaining with Imperfect Information: A Study of Worker
Perceptions of Legal Protection in an At Will World”
(1997-98) 83 Cornell L Rev 105.
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Chapter 8 Expressed Terms of Employment Contracts 131
29. See Wright v. The Young and Rubicam Group of Companies
(Wunderman)¸ supra note 28; Garreton v. Complete Innovations Inc., 2016 ONSC 1178; Waddell v. Cintas
Corp., 2001 BCCA 717; Covenoho v. Pendylum Ltd., supra
note 24; and Shore v. Ladner Downs, 1998 CanLII 5755
(BCCA). But see Kerzner v. American Iron & Metal
Company Inc., 2017 ONSC 4352 (chance of the term
becoming non-compliant with the ESA was too remote to
render the clause unlawful); and Davies v. Canada Shineray Suppliers Group Inc., 2017 BCSC 304 (clause was not
unlawful because it potentially restricted the employee’s
right to bring a hypothetical human rights complaint).
30. See, e.g., Wood v. Fred Deeley Imports Ltd., supra note 28.
31. See Bowes v. Goss Power Products, 2012 ONCA 425.
32. The doctrine of unconscionability is sometimes argued in
the context of “releases” presented to dismissed employees.
A release is a contract that offers an employee certain benefits, such as continued payment of wages for a future period
“in consideration” for an agreement from the employee to
not bring any legal proceedings against the employer.
Employees sometimes realize after they signed the release
that they would have been entitled to a greater amount of
damages had they brought a wrongful dismissal lawsuit. In
order to set aside the release, they may argue that it was unconscionable. For a review of the origins and controversies
associated with the doctrine of unconscionability, see
McCamus, supra note 8 at 424-46; and S. Waddams, “Unconscionability in Contract” (1976) 39 Mod L Rev 369.
33. See Heller v. Uber Technologies Inc., 2019 ONCA 1 at para
60 (mandatory arbitration in Uber driver standard contract is unconscionable); Stephenson v. Hilti (Canada) Ltd.,
1989 CanLII 191 (NSSC); Harry v. Kreutziger, 1978 CanLII
393 (BCCA); Lambert v. Digital Rez Software Corp., 2002
BCSC 481; Finlan v. Ritchie Bros. Auctioneers (Canada)
Ltd., 2006 BCSC 291; White v. Corner Brook Pulp and
Paper Ltd., 1996 CanLII 11710 (Nfld. SC); and Adamson v.
Watts & Henderson (Atlantic) Ltd. (1987), 16 CCEL 74
(Ont. H Ct J); and Morrison v. Coast Finance Ltd., 1965
CanLII 493 (BCCA).
34. Stephenson v. Hilti (Canada) Ltd., supra note 33.
35. On the “change to the substratum of the contract” doctrine, see Lyon v. Canadian Acceptance Corp. (1983), 3
CCEL 220 (Ont. H Ct J) (24-year service vice-president
was not bound by a notice clause in the contract he signed
when originally hired as a junior clerk); Collins v. Kappele,
Wright & MacLeod Ltd. (1983), 3 CCEL 228 (Ont. Co Ct);
Rasanen v. Lisle-Metrix Ltd., 2002 CanLII 49611 (Ont. Sup
Ct J); Sawko v. Foseco Canada Ltd. (1987), 15 CCEL 309
(Ont. Dist Ct); Schmidt v. AMEC Earth & Environment,
2004 BCSC 1012; and MacGregor v. National Home Services, 2012 ONSC 2042. See also Strench v. Canem Systems
Ltd., 2005 BCSC 1736 (the doctrine does not apply when
the contract term contemplates the changes that were
eventually made).
36. Statistics Canada, “Retirement Age by Class of Worker,
Annual,” Table 14-10-0060-01, online: <https://
www150.statcan.gc.ca/t1/tbl1/en/cv.action?pid=14100060
01#timeframe>.
37. See R. Luciw, “One-Third of Young Canadians Have No
Retirement Savings,” Globe and Mail (1 August 2012),
online: <http://www.theglobeandmail.com/globe​
-investor/personal-finance/home-cents​/one-third-of​
-young-canadians-have-no-retirement-savings/​
article4453200/>.
38. For discussion of retirement clauses, see, e.g., Foreman v.
818329 Ontario Limited, supra note 5; Vondette v. Vancouver Port Corp., 1987 CanLII 2411 (BCSC); Heslop v. Cooper’s Crane Rental Ltd., 1994 CanLII 7384 (Ont. Sup Ct J);
Engel v. Krug Furniture Inc., 1994 CanLII 7388 (Ont. SC);
Filiatrault v. Tri-County Welding Supplies Ltd., 2013
ONSC 3091; and Stock v. Best Form Brassière Canada Inc.
(1986), 15 CCEL 298 (Que. SC). See also McLaren v.
Pacific Coast Savings Credit Union, 2001 BCCA 388 (an
employee’s comments that he intended to retire did not
relieve the employer of the duty to provide notice of termination); and Magnan v. Brandt Tractor Ltd., 2008
ABCA 345.
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CHAPTER 9
Implied and Ancillary Employment
Contract Terms
LEARNING OBJECTIVES
CHAPTER OUTLINE
After reading this chapter, students will be able to:
I. Introduction 133
II. Implied Contract Terms 134
A. On What Basis Do Judges Imply Contract Terms? 134
B. How Judges Use Implied Terms to Shape Employment
Contracts 136
C. Implied Terms That Regulate the Conduct of Employees 138
D. Implied Terms That Regulate the Conduct of Employers 142
III. Contract Terms Found in Ancillary Documents 145
IV. Chapter Summary 147
Questions and Issues for Discussion 147
Exercise 148
Notes and References 149
• Explain the difference between an implied contract term and an
expressed contract term.
• Explain the methods courts use to justify the implication of contract terms.
• Describe how judges used implied terms to preserve the basic authority
structures that existed under the old master and servant laws.
• Describe the implied contract terms that regulate employee conduct.
• Describe the implied contract terms that regulate employer conduct.
• Explain when an ancillary document, such as an employee handbook or
human resource policy manual, is legally enforceable.
I. Introduction
In Chapter 7, we looked at the case of Rejdak v. Fight Network Inc., in which an employment
contract was created during a telephone conversation. The judge ruled that the terms of that
contract consisted of a job title, an annual salary, and a start date, all of which were agreed to
during the phone call. The conversation included an oral offer, an oral acceptance, and an agreement that included mutual consideration. These elements formed a contract; nothing in writing
was required. Oral contracts based on brief conversations and short written contracts are not
uncommon in the employment setting, and they can govern the employment relationship
between parties for years. Inevitably, the juxtaposition of sparse contract terms and long-term
relationships often leads to many gaps in the coverage of a contract.
Must the employee do whatever the employer asks? Can the employer add new tasks to the
employee’s job or take away existing tasks? Is the employee’s behaviour outside of work any of
the employer’s business? What is required to terminate the contract? Can the employee compete
against the employer either during employment or after the employment relationship is over?
These are just some of the many questions that can arise during employment that are not
answered by the expressed terms of a contract. The law requires a method of resolving disputes
that arise during the life of the employment relationship, but that the parties did not specifically
address when they formed the contract.
Implied contract terms often perform this role in the common law regime. Implied contract
terms are made up by judges and inserted into (or “read into”) the contract. They are “default
contract terms,” in the sense that they fill gaps left by the contracting parties and are subject to
exclusion by the contracting parties.1 For example, one of the most important implied terms we
implied contract term: A default contract term invented by common law judges and read into an employment contract
when the written terms of the contract (if any) do not address the specific issue addressed by the implied term.
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133
134 Part II The Common Law Regime
will learn about in this chapter is the requirement to provide “reasonable notice” before terminating an employment contract (Chapter 10 explains this implied term in detail). However,
since “reasonable notice” is an implied term, it can be excluded by the contracting parties by the
inclusion in the contract of an expressed agreement to provide some other defined amount of
notice of termination, as we learned in Chapter 8.
Understanding implied terms is crucial to understanding employment contracts. Common
law judges have developed a set of standardized implied contract terms that form the bedrock
of employment contracts in the common law regime. Note that implied terms are as real as
expressed terms, as the Supreme Court of Canada has explained:
The law has always treated express and implied contract terms as being equivalent in effect. Breach
of an implied term is just as serious as breach of an expressed term.2
The implied terms discussed in this chapter form part of every (non-union) employment
contract in Canada, unless the parties have expressly agreed (orally or in writing) to exclude or
modify them.
In Chapter 8, we noted that there are three potential sources of employment contract terms:
expressed, implied, and ancillary contract terms. Ancillary contract terms are found in documents
that are physically separate from the employment contract, such as employee handbooks and benefits manuals. This chapter will conclude with a discussion of these documents and the question of
their legal significance. Is a promise found in an ancillary document legally enforceable?
II. Implied Contract Terms
As noted in the introduction, implied contract terms are extremely important in the employment context. Many of the important rules that shape the employment relationship have their
foundation in an implied term. Before turning to consider the most important of these terms,
we will briefly consider how judges have justified their decision to imply terms into employment
contracts and how they used implied terms to construct a distinctive form of employment relationship that carried over many of the basic authority structures that had existed in the era of
master and servant law (discussed in Chapter 5).
A. On What Basis Do Judges Imply Contract Terms?
Courts have recognized two methods for implying contract terms: (1) implication of terms “in
fact” based on the presumed intentions of the parties; and (2) implication “in law” based on the
judges’ belief that it makes good policy sense to imply the term.
Tracing the origins of the first method takes us to the River Thames in London, England, in
1889 and the case of The Moorcock3 (see Box 9.1). The Moorcock decision relied on the “presumed intention of the parties” as the basis for implying the contract term. The idea is that, by
implying the term, the judge is simply giving expression to the agreement the parties themselves
intended all along. Courts have deployed various rhetorical devices to explain how they know
what the parties intended. In The Moorcock decision, for example, the court referred to a business efficacy test. Applying this test, a contract term is deemed to be intended by the parties
when, in the court’s opinion, the term is necessary to make the particular contract involved effective.4 Thus, when a contract is to provide safe mooring for ships, the parties surely must intend that the ship be safe for mooring.
ancillary contract terms: Contract terms found in written materials that are physically separate from an employment
contract but that include rules that relate to the employment relationship. Examples of ancillary documents include
employee handbooks, benefits handbooks, and human resources policy manuals.
business efficacy test: An approach used by common law judges to justify the implication of a contract term on the basis
that the term is necessary to make the contract effective.
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Chapter 9 Implied and Ancillary Employment Contract Terms 135
BOX 9.1 » TALKING WORK LAW
The Moorcock and the Origins of the Implied Contract Term
The Moorcock was a cargo ship. Its owners contracted with a
“wharfinger”—a person or business that operates slips at a
wharf—to use one of its slips on the Thames. While moored on
the slip, the tide went out, causing the hull of the ship to smash
against a hard ridge, damaging the ship. The Moorcock owners
sued the wharfinger for breach of contract in an attempt to
recover damages. The court implied a contract term that required the wharfinger to take reasonable care not to endanger
the ship and ruled that the wharfinger had breached it. Lord
Justice Bowen explained when a judge can imply a contract
term:
I believe if one were to take all the cases … of implied
warranties or covenants in law, it will be found that
in all of them the law is raising an implication from
the presumed intention of the parties, with the object
of giving to the transaction such efficacy as both
parties must have intended that at all events it
should have. In business transactions such as this,
what the law desires to effect by implication is to give
such business efficacy to the transaction as must have
been intended … by both parties.* [Emphasis
added]
The Moorcock unloading its cargo at London Docks.
Therefore, although the written contract itself was silent
(said nothing) about whether the wharfinger was liable
for damages caused to a ship while moored in its slip, the court
implied a contract term making it so. According to the court,
the parties must have intended that the ship would not be
damaged or destroyed in the course of the very business
(mooring and offloading) that the contract contemplated.
* The Moorcock (1889), 14 PD 64.
In a 1939 decision, the British Supreme Court (known then as the House of Lords) introduced the officious bystander test to explain how courts can determine if a term was intended
by the parties, described as follows:
[T]hat 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 a common, “Oh, of course.”5
In Canada, the officious bystander test and business efficacy test have often been used interchangeably. Both tests involve courts assessing what the parties most likely intended to occur in
the circumstances.6
The presumed intent of the parties can also be gleaned from standard industry practices, the
facts in a particular case, the type of job involved, the parties’ conversations, and past practices
at a particular workplace.7 If a practice has long been followed at a workplace, and both parties
have accepted the practice, then a court may find that the parties intended that practice to
be incorporated into the contract as an implied term.8 In this way, a workplace norm (see
officious bystander test: An approach used by common law judges to justify the implication of a contract term based
on the presumed intention of the parties. The idea is that a contract term is implied if it would be obvious to an uninterested
bystander that both parties intended the term to be part of the contract.
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136 Part II The Common Law Regime
Chapter 2) can rise to the level of an enforceable expectation when judges look to past practice
as an interpretive aid. For example, if changes to job duties have always been negotiated in the
past, a court may treat the obligation to negotiate such changes in the future as an implied term
of the contract.9 When terms are implied based on the presumed intention of the parties, they
are referred to as contract terms implied “in fact.”
The second method by which judges imply terms does not rely directly on the presumed
intentions of the parties at all. Sometimes judges imply contract terms based on their own view
of a legal duty that ought to be imposed because of the nature of the contract involved, including
an assessment of how the courts have long treated that type of contract. Terms implied in this
way are referred to as contract terms implied “in law.” Justice McLachlin of the Supreme Court
of Canada explained the key distinction between terms implied “in fact” and “in law” as
follows:
The intention of the contracting parties is relevant to the determination of some implied terms, but
not all. Intention is relevant to terms implied as a matter of fact, where the question is what the parties
would have stipulated had their attention been drawn at the time of contracting to the matter at issue.
Intention is not, however, relevant to terms implied as a matter of law.10
Many of the key implied terms in employment contracts are implied “in law” on the basis
that they have become standard terms of employment contracts unless the parties expressly
agree otherwise, including the implied term requiring reasonable notice of termination.11 In
practice, however, judges often do not explain the basis for the implied term at all. The terms are
just treated as standard implied terms of employment contracts, with little discussion of the
origins or basis for the implication.
B. How Judges Use Implied Terms to Shape Employment Contracts
The methods of implying contract terms confer a great deal of discretion on judges to shape
employment contracts. What might seem “obvious” to a judge might not be obvious at all to a
typical employee or employer. Does the hypothetical “officious bystander” take into consideration what judges themselves have long recognized—that by virtue of its superior bargaining
power the employer can usually include almost any lawful term in the contract it likes? If so,
then the officious bystander test is really little more than a question of whether the employer
would have written the term into the contract had it thought to do so. The ability to imply terms
based on policy justifications or on long-standing custom in relation to employment contracts
in the case of terms “implied in law” casts the judge in the role of a pseudo-legislator, requiring
no consideration of the parties’ intentions at all.
Throughout the 19th and 20th centuries, British judges used the legal device of the implied
term to design a distinctive form of employment contract that carried over the basic structures
of authority that had defined the old master and servant regime (see Chapter 5), as described by
Professor Hugh Collins of Oxford University:
The economic relation between employer and worker was described in the same terminology, a
contract between master and servant, and into this contract the courts implied legal obligations that
preserved the authority relation.12
contract term implied “in fact”: A term implied into a contract by a judge that reflects the presumed intentions of the
parties.
contract term implied “in law”: A term implied into a contract by a judge as a matter of the legal duty that the judge
believes ought to be imposed due to the nature of the particular type of contract.
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Chapter 9 Implied and Ancillary Employment Contract Terms 137
Professor Collins’ point is that the standard bundle of terms implied in employment contracts by judges ensured a model based on subordination: the employer was assumed to have all
of the authority necessary to direct the employee as it deems fit, with a corresponding obligation
on the employee to serve the employer loyally and to act in the employer’s best interests, both at
work and sometimes outside of work too.
Because the ability to imply contract terms leaves so much discretion in the hands of judges,
we might theorize that the substance and application of implied terms would change as society’s
and judges’ attitudes and values evolve. Referencing the law of work framework presented
in Chapter 2, changes in the social, cultural, and religious subsystem would be expected eventually to infiltrate and influence the common law regime in the form of new or revised implied
terms. Evidence exists that this does in fact occur. Professor Geoffrey England described this
process:
[T]he golden thread in the evolution of employment contract law is that courts are continually
refashioning the legal rules in order to facilitate the operation of the prevailing standards of personnel
management practice; they also strive to reflect society’s changing vision of what an employment
relationship ought to resemble. The implied term is one of the main tools used by courts for this
purpose.13
A recent example of such an evolution is the recognition of a new implied term in Canada
since the late 1990s requiring employers to treat employees with “decency, civility, respect, and
dignity,” which is considered below.14 That it took until the end of the 20th century for common
law judges to recognize that the employment relationship should require decent and respectful
treatment by both parties (and not just employees) might seem surprising. However, it reflects
a current trend in employment law whereby judges are demonstrating more sensitivity to the
vulnerability of employees than judges of prior generations, a point that will be discussed at
various points in subsequent chapters.
TABLE 9.1
Standardized Implied Terms of Employment
Implied Terms That Regulate Employee Conduct
Implied Terms That Regulate Employer Conduct
The following are standardized implied terms of employment contracts in Canada unless the parties have agreed otherwise.
• Obey lawful employer orders
• Provide a reasonably safe work environment
• Serve the employer faithfully and cooperate in advancing the
employer’s commercial interests
• Not impede the ability of the employee to perform their
assigned work
• Provide reasonable notice of resignation
• Treat employees with decency, civility, respect, and
dignity (duty of fair dealing)
• Not compete against the employer or use information to harm
the employer
• Provide reasonable notice of termination
• Report to work when instructed and avoid lateness and unauthorized
absences
• Act in good faith and with decency in the manner in
which employees are terminated
• Be honest
• To compensate employees for work performed
• Perform work competently and safely
• Avoid intoxication at work
• Avoid harassment of others
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138 Part II The Common Law Regime
C. Implied Terms That Regulate the Conduct of Employees
Implied terms most often come before the courts in wrongful dismissal lawsuits filed by
employees against employers. We will learn in Chapter 12 that in the common law system, an
employer can dismiss an employee with no notice if the employee has committed a serious
breach of contract (called summary dismissal). An employee dismissed in this way may sue their employer for
wrongful dismissal, and in its defence, the employer will
argue that the employee breached a term of the contract,
including an implied term. The court must then decide
whether the implied term exists and whether it was
breached by the employee.
Over the years, the courts have developed a long list
of standardized implied terms that impose rules on
employees and are assumed to apply to all employment
contracts, unless the parties have expressly agreed
otherwise. The most important of these are described
below. Since employment contracts are usually drafted
by employers primarily to their benefit, it is rare that
expressed contract terms exclude these implied terms.
As a result, most employment contracts in Canada
include the following implied terms.
1. Implied Obligation to Obey the Lawful Orders of the Employer
The foundation of the employment contract is the duty of fidelity owed by employee to employer. This duty is most clearly captured in the first two implied terms we will discuss. The first
is the implied obligation of employees to obey the employer’s lawful orders. The leading authority for this implied term is the 1959 British case Laws v. London Chronicle (Indicator Newspapers) Ltd., in which the court stated:
[W]ilful disobedience of an order will justify summary dismissal, since wilful disobedience of a
lawful and reasonable order shows a disregard—a complete disregard—of a condition essential to
the contract of service, namely, the condition that the servant must obey the proper orders of the master
and that, unless he does so, the relationship is, so to speak, struck at fundamentally.15 [Emphasis
added]
The implied obligation to obey the employer’s orders colours the entire employment contract,
informing us that the consideration an employee gives an employer is the employee’s submission
to the direction and control of the employer. When an employee breaches the implied term
requiring obedience to the employer’s lawful orders, it is known as insubordination (see also
the discussion in Chapter 12 on summary dismissal for cause).16 This implied term was
explained succinctly by the BC Court of Appeal in the 1992 case Stein v. British Columbia Housing Management Commission:
wrongful dismissal: A type of lawsuit by an employee against a former employer alleging that the employer terminated
their contract without complying with the implied term in the contract requiring “reasonable notice.”
summary dismissal: Termination of an employment contract by an employer without notice to the employee in response
to a serious breach of contract by the employee.
insubordination: A breach by an employee of the implied or expressed term of an employment contract requiring the employee to obey an employer’s orders and instructions.
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Chapter 9 Implied and Ancillary Employment Contract Terms 139
I begin with the proposition that an employer has a right to determine how his business shall be
conducted. He may lay down any procedures he thinks 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 of every
employment contract that, subject to the limitations I have expressed, the employee must obey the orders
given to him.17 [Emphasis added]
The duty of employees to follow their employer’s orders is not absolute, as this passage notes.
An employee can refuse “unlawful” orders, such as those that would require the employee to
violate a statute or commit a tort (see Chapter 12), or orders that would put the employee or
someone else in physical peril. In addition, an employee is not required to obey an order that is
fundamentally inconsistent with the terms of the contract. For example, an employee is not
required to accept a demotion, which is a reassignment to a lower paying or less prestigious
job.18 In many cases, an employee who refuses an employer’s order that the employee believes
violates the contract—such as an order to accept a demotion—will quit and sue the employer
for constructive dismissal, which we will explore in detail in Chapter 13. A constructive dismissal occurs when an employer commits a serious violation of the contract that the employee
treats as a termination of the contract.
However, courts have ruled that the implied term requiring employees to obey lawful
employer orders encompasses an implied right of employers to make “reasonable” and nonfundamental changes to an employee’s job that do not amount to a demotion. As one judge put
it recently, it is “an implied term of any contract of employment … that the employer has the
right, if it sees fit to do so, to make a reasonable reassignment of an employee to other duties.”19
A reassignment of job duties is more likely to be considered “reasonable” if it is relatively minor,
if it does not involve a reduction in pay, and if, due to the nature of the job or to a past practice
of similar job reassignments, the employee would have expected that such changes might
occur.20
2. Implied Obligation to Serve the Employer Faithfully and to Cooperate in
Advancing the Employer’s Commercial Interests
Employees have an implied obligation of “fidelity,” which basically means that they are
required to serve the employer faithfully in a manner that advances the employer’s commercial interests.21 A classic example of this implied term can be seen in a 1972 case involving British train drivers who, in an attempt to apply pressure on their employer to agree to
improved working conditions, engaged in what we now call a “work to rule.” That is, they complied meticulously with the terms of their employment contract. Doing so caused the rail
system to come to a screeching halt. The interesting part of this case is that the workers were
complying with the written terms of their employment contracts, but the court was asked to
nevertheless rule that the “work to rule” was a breach of their contracts. And that is what the
court did. Lord Justice Buckley ruled that “an employee must serve the employer faithfully with
a view to promoting those commercial interests for which he is employed.”22 Hence, the train
drivers were in breach of the implied term requiring them to serve their employer faithfully and
to promote the employer’s commercial interests by strictly complying with the written contract
terms!23
demotion: A reassignment of an employee’s position by an employer to another position with lower pay, less prestige, or
less responsibility.
constructive dismissal: A fundamental change to an employment contract by an employer that an employee may treat
as an effective termination of the contract.
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140 Part II The Common Law Regime
The overriding implied obligation on employees to serve the employer faithfully with a view
to advancing the employer’s commercial interests, along with the related implied obligation on
employees to obey lawful employer orders, confers on employers a substantial degree of control
over their employees. This is what Professor Collins meant (page 136) when he said that judges
used implied terms to carry over the basic authority structures from the master and servant
model into the employment contract model.
All of the implied terms described below that impose obligations on employees may be
understood as corollaries of these first two implied terms. Indeed, with the exception of the
implied term requiring employees to provide the employer with reasonable notice of termination, the following implied terms are often just lumped together by the courts under a general
“implied duty of fidelity and faithful service” rather than singled out as separate implied terms.24
Not much turns on how we label the implied terms. However, it is useful to list them, and we
will do so briefly here. We will come across some of these terms again later in this text when we
discuss termination for cause (Chapter 12) and constructive dismissal (Chapter 13).
3. Implied Obligation to Provide Reasonable Notice of Resignation
Employees are subject to an implied term requiring them to provide reasonable notice before
terminating the employment contract. This obligation mirrors the employer’s implied obligation
to provide reasonable notice (see Section D, “Implied Terms That Regulate the Conduct of
Employers”), although the manner in which the courts calculate the amount of notice is different.25 The purpose of requiring employees to provide notice of resignation is to allow the employer time to find and train a replacement. Therefore, the length of notice required to resign
varies according to the type of job involved, the practice in an industry, and the difficulty the
employer will have replacing the employee. It will almost always be less than the amount of reasonable notice that courts order employers to provide employees. As is the case with all implied
terms, the implied obligation to provide “reasonable notice” (the amount of which is determined
by the courts) can be overridden by an expressed agreement of the parties that defines the
amount of notice required. We consider the assessment of reasonable notice of resignation more
fully in Chapter 15.
4. Implied Obligation to Not Compete and to Protect Confidential Information
An obvious corollary of the implied obligation to advance the employer’s commercial interests
is the implied term prohibiting employees from competing against their employer during the
employment relationship.26 An employee who secretly earns income competing against their
employer is in breach of the employment contract. Note that this obligation to avoid competition only applies while the employment contract subsists. There is no implied obligation on an
employee to refrain from competing against a former employer, although as discussed in Chapter 8, there may be a written (expressed) non-competition clause. Absent an expressed noncompetition clause, an employee is entitled to compete against their employer any time after
they have quit or given the employer notice that they are quitting.
The Supreme Court of Canada explained this point as follows in RBC Dominion Securities v.
Merrill Lynch Canada (see Box 9.2):
Generally, an employee who has terminated employment is not prevented from competing with his
or her employer during the notice period, and the employer is confined to damages for failure to give
reasonable notice. To this general proposition [can be added] the qualification that a departing employee might be liable for specific wrongs such as improper use of confidential information during
the notice period.27
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Chapter 9 Implied and Ancillary Employment Contract Terms 141
BOX 9.2 » CASE LAW HIGHLIGHT
Implied Term Prohibiting Employees from Competing with Their Employer
RBC Dominion Securities Inc. v. Merrill Lynch Canada Inc.
2008 SCC 54
Key Facts: DD was branch manager of RBC Dominion Securities in Cranbrook, British Columbia. In 2000, DD quit RBC
without notice and immediately commenced employment
with RBC’s competitor, Merrill Lynch. While employed by RBC,
DD had encouraged investment advisers under his supervision
to follow him to Merrill and all but two did so, leaving the RBC
office decimated. DD and the other advisers also copied confidential RBC client information several weeks before they quit
RBC and gave this information to Merrill. As a result of the
sudden departure of its investment advisers, RBC suffered significant financial losses. RBC sued DD and the other former
investment advisers for breach of the implied terms in their
contracts requiring them to serve RBC in good faith and to
provide RBC with notice of termination.
Issue: Did DD and the other investment advisers breach implied terms in their employment contracts to serve RBC faithfully and provide notice of termination?
Decision: Yes. First, all of the RBC employees breached their
implied duty to provide reasonable notice of termination to
RBC. The court fixed that period of notice at two and a half
weeks based on industry norms. The court calculated damages based on the profit that the advisers would have earned
for RBC during that period, which was determined to be
$40,000 in total. Second, as branch manager, DD’s implied
duty of good faith service to RBC included an obligation to
retain the investment advisers and not to persuade them to
join a competitor. DD also breached this term. Third, the employees breached the implied obligation in their contracts to
not misuse confidential information to harm RBC when they
copied and removed from RBC a list of RBC’s clients and gave
it to Merrill.
DD was ordered to pay damages amounting to nearly $1.5
million based on lost profits to RBC caused by the mass exodus
of almost all of its investment advisers with no notice and the
misuse of RBC’s confidential information. The court also ordered the investment advisers to pay $5,000 each and DD to
pay $10,000 in punitive damages to RBC based on the misappropriation of RBC’s customer lists for the benefit of Merrill
Lynch.*
* The court also ordered significant damages against Merrill Lynch and
a manager employed by it who helped orchestrate the departure of
DD and the investment advisers from RBC. Note also that Merrill Lynch
agreed to pay all of the damages ordered against DD and the
investment advisers.
As the court notes at the end of this passage, an employee—even one who has quit—cannot
use confidential information obtained from their employer to harm the employer’s commercial
interests. Confidential information includes a trade secret or other confidential business information that is removed from the employer’s premises, including a list of customers (although,
absent a non-competition clause, an ex-employee is permitted to contact former customers of
the former employer if they do so from memory rather than from a document improperly
removed from the workplace).28
5. Implied Obligation to Report to Work and to Avoid Lateness and Absenteeism
The employer has the implied (and sometimes the expressed) right to determine the work
schedule. Absenteeism and lateness can be a violation of the employee’s obligation to obey
orders or, more specifically, an implied contract term recognized by judges requiring employees
to attend work when scheduled.29
6. Implied Obligation to Be Honest
An employee must be honest with the employer, which obviously includes avoiding deliberate dishonesty and theft.30 Some courts have added that this obligation also includes not
concealing from the employer “facts which ought to be revealed.”31 That is vague language,
and the scope of its possible application is uncertain, but it has been applied, for example, to a
bank manager who kept secret from his employer an affair he was having with one of his
subordinates.32
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142 Part II The Common Law Regime
7. Implied Obligation to Perform Competently and Safely
Canadian courts have recognized an implied obligation on employees to perform their job
competently.33 The effect of this implied term is that incompetent job performance by an employee is a breach of contract. However, as we will see in Chapter 12, the courts have also ruled
that only serious or “gross” incompetence would normally justify a summary dismissal.
8. Implied Obligation to Avoid Intoxication
Judges have long implied a term that intoxication at work is prohibited.34 Employees who report
to work intoxicated are putting themselves, others, and employer property at risk. In practice,
this implied term often becomes relevant when an employee is accused of breaching another
term of the contract, such as the requirements of competent performance and proper attendance. In such cases, the intoxication causes absenteeism or performance problems. As we will
see in Chapter 12, whether intoxication is grounds for summary dismissal usually depends on
how seriously it undermines the employee’s job performance.35 It is notable too that when the
employee involved is an alcoholic or addicted to drugs, human rights laws may impose obligations on the employer that may restrict the right of the employer to terminate the employee. We
will consider that issue in Part III when we look at disability at work.
9. Implied Obligation to Avoid Harassment
Many employers include anti-harassment provisions in the written terms of their employment
contracts, and those terms have been found to have been breached by an employee in numerous
decisions.36 However, even if this obligation is not an expressed term, common law judges have
found harassing employees to be in breach of implied obligations to avoid harassment at work.37
Whether the harassment is serious enough to constitute grounds for summary dismissal
depends on the seriousness of the harassment, whether the employer had a well-known harassment policy, whether the employee was in a position of authority, and a variety of other factors.38
We will consider this issue further in Chapter 12.
D. Implied Terms That Regulate the Conduct of Employers
So far, this chapter has demonstrated the extent to which common law judges have used implied
terms to shape employment contracts that ensure employees are subservient to their employers.
The implied terms discussed above form part of every Canadian employment contract—unless
the parties have bargained them out of the contract. Judges have not been completely one-sided,
however. They have also implied terms that impose requirements on employers and benefit
employees.
1. Implied Obligation to Provide Reasonable Notice of Termination of an
Employment Contract
Since the early 20th century, Canadian judges have implied a contract term requiring employers
to give the employee “reasonable notice” of the termination of an indefinite-term employment
contract. Judges decide how much notice is “reasonable” by applying factors we will consider at
length in Chapter 10. Employers frequently attempt to avoid the implied obligation to provide
reasonable notice by writing a notice of termination clause directly into the contract. However,
as we noted in Chapter 8, disputes over the application of the implied term requiring reasonable
notice of termination are the most frequently litigated issues in the common law regime.
2. Implied Obligation to Provide a Reasonably Safe Work Environment
Long before modern workers’ compensation legislation came into effect, common law courts
had implied a duty on employers to take reasonable care to ensure workers are not put in
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Chapter 9 Implied and Ancillary Employment Contract Terms 143
unreasonable danger in the performance of their job. Lord Herschell described the duty in an
1891 decision: “It is quite clear that the contract between employer and employed involves on
the part of the former the duty of taking reasonable care to provide proper appliances and to
maintain them in a proper condition and so to carry on his operations as not to subject those
employed by him to unnecessary risk.”39 This implied term has mostly been overtaken by workers’ compensation legislation, which replaces the right of employees to sue for breach of this
term in exchange for a no-fault insurance scheme, and by occupational health and safety legislation, which imposes workplace safety rules and a right to refuse unsafe work. We consider
both types of legislation in Chapter 24.
3. Implied Obligation to Treat Employees with “Decency, Civility, Respect, and
Dignity” and to Engage in “Fair Dealing”
We noted earlier that judges sometimes develop new implied terms that reflect the evolution of
social and cultural values. An example of this process is the development of the implied duty on
employers to treat employees with “decency, civility, respect, and dignity.”40 This implied term
has deep roots, but Canadian judges have only recently begun to apply it to employment situations involving verbal, physical, and psychological harassment at work.41 One of the earliest
decisions to explicitly recognize and apply the implied term requiring decency, civility, respect,
and dignity was Lloyd v. Imperial Parking Ltd., described in Box 9.3.
BOX 9.3 » CASE LAW HIGHLIGHT
Implied Terms and Decent and Respectful Treatment of Employees
Lloyd v. Imperial Parking Ltd.
1996 CanLII 10543 (Alta. QB)
Key Facts: Lloyd quit his employment after being subjected
to months of verbal abuse and constant threats to his employment by a superior at Imperial Parking Ltd. (his employer). He
sued the employer for “constructive dismissal,” arguing that the
employer’s abuse amounted to a fundamental breach of the
employment contract.
Issue: Did the employer commit a fundamental breach of the
employment contract by engaging in a pattern of verbal
abuse, giving rise to a constructive dismissal?
Decision: Yes. Here is the key passage from the decision:
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.
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.
In this case, a fundamental implied term of the
employer/employee relationship has been breached.
Mr. Noiles, Mr. Lloyd’s superior, 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. [Emphasis added]
The breach of the implied duty on the employer to treat
employees with decency, civility, respect, and dignity gave rise
to a constructive dismissal. The court ruled that the employer
was required to have given Lloyd four months’ notice of termination, and the employer was ordered to pay damages to
Lloyd for moneys he would have earned during that fourmonth period (nearly $30,000).
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144 Part II The Common Law Regime
The implied duty of decent treatment of employees has since been applied by Canadian
courts to a range of bullying and unfair treatment by employers. The courts considered the term
breached as a result of the following employer behaviour: failure to put an end to verbal harassment of an employee by a supervisor,42 being dishonest with an employee and offering the employee money to “go away,”43 engaging in “unrelenting criticism” of an employee,44 and locking
an employee out of her office with no explanation.45 These situations are a few of the many in
which the courts found that an employer had treated its employee harshly and unfairly.
In 2014, the Ontario Court of Appeal recognized a similar, arguably broader implied obligation on the employer to treat the employee with “good faith and fair dealing.”46 The court ruled
that Wal-Mart Canada had violated this term by failing to properly investigate and take steps to
stop ongoing harassment of a female employee. Wal-Mart was ordered to pay $300,000 in aggravated and punitive damages.
4. Implied Obligation to Permit Employees to Work (or Not to Prevent
Employee Performance)
Employees have a right to come to work. This does not mean they have a “right” to their job—
employees can be dismissed, and, as we saw earlier, an employer has an implied right to make “reasonable” work reassignments. However, an implied term in employment contracts requires
employers to permit employees to perform the labour their contracts contemplated and to pay them
for that labour. This is a corollary of the more general implied term in contracts that the parties will
cooperate in the fulfillment of the objectives of the contract and not prevent performance.47
The implied obligation of an employer to not prevent the employee from performing their
labour has important implications that often surprise employers. For example, an indefinite
layoff and an unpaid suspension violate this implied term since both involve the employer
refusing employees the opportunity to perform their end of the contract.48 The employer is
essentially saying, “stay home until I decide to let you come back to work.” It is a breach of the
contract for an employer to do that, unless the contract includes an expressed right to suspend
or lay off employees, or there is a well-established history in the industry of temporary layoffs
that the employee can be presumed to have agreed to.49 One judge explained why a layoff constitutes a fundamental breach of the employment contract as follows:
In an employment contract, the essential elements are the offer by the employee to work and by the employer to provide work and to pay compensation. Absent a provision permitting the employer to
suspend the obligation to provide work for an indefinite term, even with an undertaking to recall
upon work being available, the effect on an employee is really no different than in a termination
where the employer undertakes to rehire, if a position later becomes available.50
An employee who is laid off in the absence of a contract term permitting layoffs is probably
entitled, if they so choose, to quit and sue the employer on the basis that they were “constructively dismissed” when the employer prevented them from coming to work. We will consider the
application of this implied term again when we examine constructive dismissal in Chapter 13,
including a case called Carscallen v. FRI Corporation later, in which an unpaid suspension is
ruled to be a fundamental breach of the employment contract.51
5. Implied Obligation to Compensate Employees for Work Performed
Modern employment standards legislation (Part III) includes a requirement for employers to
pay employees wages and rules on what wages are acceptable (minimum wages, overtime pay,
layoff: A non-disciplinary suspension imposed by an employer of the employee’s right to come to work, usually due
to a lack of available work.
unpaid suspension: A temporary suspension of an employee’s right to come to work imposed by the employer as
a form of discipline for employee misconduct.
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Chapter 9 Implied and Ancillary Employment Contract Terms 145
etc.). However, even before such legislation, the common law recognized an obligation for
employers to compensate workers for their labour.52 This implied obligation was either based
on the presumed intention of the parties or flowed from an old legal concept known as
quantum meruit. Quantum meruit (Latin for “the amount it deserves”) permits judges to order
payment for services based on a fair assessment of the value of the services when a contract
does not specify a rate of pay or where there was no formal contract entered into in relation to
that labour.53
6. Implied Obligation to Act with Good Faith in the Manner of Dismissal of an
Employee
We will explore this final implied term at length in Chapter 14 when we consider how courts
assess damages in cases involving the wrongful termination of employees. Therefore, we will
provide just a quick introduction here. In two important cases, Wallace v. United Grain Growers
(1997) and Honda v. Keays (2008), the Supreme Court of Canada recognized an implied obligation of fair dealing and good faith in the manner in which an employer terminates an employee.54 To be clear, this implied term does not prevent an employer from terminating an
employee or even require an employer to have a reason to do so. Rather it requires an employer
to treat employees professionally, sensitively, and with decency in the manner in which the termination is implemented. Employers who have been dishonest or just plain mean when they
terminate employees have been ordered to pay large damage awards for breaching the implied
obligation to act in good faith in the manner of dismissal. Examples are discussed in Chapter 14.
III. Contract Terms Found in Ancillary Documents
Many workplaces have documents that describe rules that apply to the employment relationship, such as employee handbooks, human resource policy manuals, retirement plans, and benefits handbooks. These documents might stipulate rules relating to termination of employment,
discipline, or benefits eligibility or entitlements, among other things. The courts are sometimes
asked to decide whether the rules found in ancillary documents are legally enforceable. The
answer depends on whether those documents constitute a separate legal contract or are part of
the existing employment contract.55 If neither, then the terms of the ancillary document are not
enforceable.
The central point to recall is that an enforceable contract consists of a mutually agreed upon
promise consisting of an intention to create legal relations, and an offer, acceptance, and mutual
consideration, as we learned in Chapter 7. At a minimum, both parties need to know about the
ancillary document, and there must also be clear evidence that both agreed to its terms and
understood and intended that the document would be legally enforceable. A document prepared unilaterally by an employer but never actually provided to the employee will not be legally
enforceable. How can an employee accept terms they are not even aware exist?
If the ancillary document exists at the time the parties enter into the employment contract,
then it can be expressly incorporated into the contract by clear language, such as, “The Employee Handbook attached to this contract forms part of this employment contract.” That sort
of clear language would head off future disputes about whether the handbook is enforceable.
Similarly, if the employee is provided with the ancillary document and advised orally at the time
the contract is formed that the terms in it comprise part of the employment contract, then that
too would have the effect of incorporating the document into the employment contract.56 In
these scenarios, the requirement of mutual consideration is satisfied, since the terms in the
ancillary document form part of the initial exchange of promises and benefits in the employment contract.
quantum meruit: An entitlement to be paid a fair market rate for work performed when the amount is not stipulated in a
contract.
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146 Part II The Common Law Regime
However, in many of the reported court decisions, the ancillary document was introduced by
the employer at some point during the employment relationship, rather than when the employment contract was initially negotiated.57 In that case, the terms in the ancillary document are
legally enforceable only if two conditions are satisfied.
First, it must have been made clear to the employee that the new document was intended to
be legally enforceable, and the court must be satisfied that the employee understood and agreed
to that condition. The employee’s agreement will not be assumed from the fact that the employee
continues to work after the document is given to them. The employee was already required to
come to work before the new document was introduced, so continuing to work afterward does
not establish agreement to any changes found in the document, as explained in the Rahemtulla
v. Vanfed Credit Union case in Box 9.4.58
BOX 9.4 » CASE LAW HIGHLIGHT
Is an Ancillary Document Introduced During a Contract Enforceable?
Rahemtulla v. Vanfed Credit Union
1984 CanLII 689 (BCSC)
Key Facts: Rahemtulla was terminated from her job as a bank
teller after 15 months’ employment. The employer accused her
of theft of money, although at trial it argued that the termination was not for cause. The employment contract was indefinite in duration and did not include a notice of termination
clause. However, the employer sought to rely on a term found
in a policy manual that had been handed to the employee a
few days after she commenced employment. The manual
stated that the employer could terminate an employee by
providing two weeks’ notice, which the employer had given
the employee in this case. The employee argued that the policy
manual was neither part of her employment contract nor a
separate binding contract and therefore was not enforceable,
and she was entitled to implied reasonable notice.
Issue: Is the notice of termination provision found in the policy
manual enforceable?
Decision: No. The court explained:
[I]f the terms of the policy manual are to be binding,
it must be concluded that they have contractual
force. The usual elements of a contract must be established: a concluded agreement, consideration,
and contractual intention.
Here, the employer provided the manual to Rahemtulla, but
there is no evidence that she accepted it as part of her contract.
The fact that she continued to work after she was given the
manual and she did not verbally object to the manual’s terms
cannot be treated as acceptance because she was already required to work under the original contract terms:
Communication of assent [to terms in an employee
manual] cannot be inferred from the fact that the
[employee] continued to work after being given the
manual. She had contracted to work for the [employer] prior to receiving the manual. The fact that
she continued to fulfil this obligation after being
given the manual cannot be taken as an assent to
its terms.
Moreover, Rahemtulla had received no new consideration in
exchange for the rights granted to the employer in the
manual:
[I]t may be questioned whether there was valid consideration for the promise the plaintiff is alleged to
have made to be bound by the policy manual. Performance of an existing duty is no consideration:
Stilk v. Myrick (1809) … . The defendant’s obligation
to employ having arisen before delivery of the policy
manual, its performance of that obligation cannot
constitute consideration for any new terms imposed
on the plaintiff by the manual.
Since Rahemtulla had not agreed to the terms in the manual
and, in any event, there had been no new consideration given
to her in exchange for the right of the employer to terminate
with two weeks’ notice, the term in the manual was not enforceable. Rahemtulla was entitled to reasonable notice, which
the court fixed at six months. The employer was ordered to
pay an amount equal to six months’ wages, plus an additional
$5,000 in mental suffering damages for “recklessly” accusing
Rahemtulla of theft. (See Chapter 14 for a discussion of mental
suffering damages.)
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Chapter 9 Implied and Ancillary Employment Contract Terms 147
Second, even if the employee agreed to the new terms found in the ancillary document, perhaps signing the document, those terms will still not be enforceable unless both the employer
and employee received “new consideration” when the ancillary document was introduced.59
Mutual consideration is required for an agreement to be legally enforceable, and this requirement applies to any modifications to the employment contract introduced through an ancillary
document, as we saw in Chapter 7.
In the case described in Box 9.5, the court ruled that the ancillary document was enforceable.
See if you can identify what distinguishes the Johnson decision from the Rahemtulla decision.
BOX 9.5 » CASE LAW HIGHLIGHT
Are Terms in Ancillary Documents Enforceable?
Johnson v. Global Television Network Inc. (CH Vancouver
Island)
2008 BCCA 33
Key Facts: About nine years into his oral employment contract,
Johnson elected to participate in a voluntary pension plan
offered by his employer, Global Television Network Inc. This
required Johnson and Global to make regular contributions to
the plan. Johnson never received a copy of the pension plan,
but he did receive a brochure describing the plan, including a
term of the plan that required Johnson to retire on his 65th
birthday. When Johnson reached 65, the employer informed
him that his employment was over, pursuant to the mandatory
retirement term in the pension document. Johnson sued for
wrongful dismissal, arguing that the mandatory retirement
term in the pension plan was not enforceable and that he was
entitled to “reasonable notice” of termination.
Issue: Was the term in the pension plan document requiring
retirement at age 65 legally enforceable?
Decision: Yes. At the trial, Johnson testified that he was
made aware of the mandatory retirement requirement in the
pension plan and that he believed it was part of his employment contract. Therefore, the court ruled that there was a
common intention formed that the mandatory retirement
term would be a legally enforceable contract term. In addition, Johnson had received new consideration in exchange
for the introduction of the mandatory retirement term “in
the form of contributions made to his pension plan by [the
employer] for approximately 30 years.” As a result, the mandatory retirement term was enforceable, and Johnson was
only entitled to wages and benefits up to his mandatory
retirement date.
IV. Chapter Summary
This chapter examined the origins and substance of the key standard implied terms that govern
non-union employment contracts in Canada. As you can see, they are extensive. Many of these
terms have their origins in old British case law, but some, such as the implied obligation on
employers to treat employees with decency, civility, respect, and dignity, are of relatively recent
vintage. Implied terms form the foundation of the employment contract in Canada, acting as
the default distribution of rights and responsibilities. However, because implied terms fill gaps
in the expressed language of the contract, they are subject to being overridden by the parties in
a written or oral agreement. We will see more examples of implied terms and how they impact
the employment relationship in Canada in later chapters.
This chapter also explained the legal significance of promises and obligations that are found
in ancillary documents that are physically separate from the employment contract. We learned
that courts closely scrutinize ancillary documents to confirm that both parties understood and
intended them to be legally enforceable.
QUESTIONS AND ISSUES FOR DISCUSSION
1. Do all of the implied contract terms discussed in this chapter apply to every employment
contract in Canada?
2. Explain the difference between contract terms implied “in fact” and contract terms implied
“in law.”
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148 Part II The Common Law Regime
3. Identify and describe a standard implied term in employment contracts that has been
recognized by Canadian courts only during the past 25 years.
4. “Insubordination” is the term used to describe a violation of which implied contract term?
5. Explain what Professor Hugh Collins meant when he wrote that judges used implied terms
to preserve “the authority relation” that had existed under the old master and servant laws
discussed in Chapter 5.
6. When is a term found in an ancillary document (such as an employee handbook) legally
enforceable?
APPLYING THE LAW
1. Daphne has worked for a local florist for 10 years. She
never signed an employment contract. The owner, Jill,
asked her if she was looking for a job, and Daphne said
she was. Daphne started the next day and has worked
full time at the florist ever since. However, last month
Jill told Daphne that business had slowed and that as a
result she had to lay off Daphne until things picked up.
Daphne was upset but understood. A couple of weeks
into the layoff, Daphne decided she did not want to return to the flower shop even if she was recalled. Daphne assumes that she is not entitled to anything from
the employer because she does not have a written employment contract and she was not actually terminated. Daphne hears that you have taken an
employment law class and so she asks you whether she
has any potential claim against the florist in these circumstances. Does she?
2. Seamus was a window cleaner employed by New View
Windows. He had signed a simple employment contract that did not include a written non-competition
clause. Seamus had been employed by New View for
nearly eight years. Last year, Seamus and his cousin
started a business called Spotless Windows. Seamus
sometimes gave his Spotless Windows business card
out to New View customers when he was out doing
their windows, telling them his company was cheaper
than New View. Last week, Jim, the owner of New View
Windows, found out about Seamus’ side business and
he terminated Seamus for cause. Seamus is furious, and
he points out to you that his contract with New View
Windows says nothing about whether he can create a
competing window cleaning business. Is Seamus correct that his employment contract with New View did
not prohibit him from creating a competing business?
3. Maggie has also worked for New View Windows as a
window cleaner for a few years. However, unlike Seamus, she never signed a written employment contract.
Seamus persuades Maggie that she would be better off
quitting New View and coming to work for Spotless
Windows. Last week, Maggie quit New View with no
notice and immediately began working for Spotless—
she just didn’t show up for work one day, and as a result New View had to pay another window cleaner
overtime pay (an extra $400 above what Maggie would
have been owed had she reported to work) to cover
her work for three days until a replacement could be
hired. Jim asks you whether he has any potential legal
action against Maggie for quitting and leaving him
“high and dry” and then joining a competitor.
EXERCISE
Try the following legal research exercise, which involves finding case law dealing with implied
contract terms.
1. Go to the CanLII home page: <https://www.canlii.org>.
2. In the “Document text” search box, type “employment contract” and “implied term.” This
search should return hundreds of Canadian decisions.
3. Select three decisions that look interesting to you from the brief summary of the decision
provided in the case header and read them. For each, identify the part of the decision that
discusses “implied terms” and answer the following questions:
a. What implied term is being discussed? Is it one that is identified in this chapter or some
other implied term?
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Chapter 9 Implied and Ancillary Employment Contract Terms 149
b. Does the court find that the implied term was breached in the case?
c. Does the judge explain the method by which the term was implied?
d. Was there an expressed or written contract term that modified or overrode the implied
term in the case?
e. If the implied term was breached in the case, was a remedy ordered for that breach? If
so, what was it?
NOTES AND REFERENCES
1. H. Collins, Employment Law, 2nd ed (New York: Oxford
University Press, 2010) at 35.
2. BG Checo International Ltd. v. British Columbia Hydro and
Power Authority, [1993] 1 SCR 12 at para 31.
3. The Moorcock (1889), 14 PD 64 at 68.
4. Another important early case applying the “business efficacy” test for implying contract terms is Reigate v. Union
Manufacturing Co., [1918] 1 KB 892. See also the discussion in Hawkes v. Levelton Holdings Ltd., 2013 BCCA 306
para 63; and Carscallen v. FRI Corp., 2005 CanLII 20815
(Ont. Sup Ct J).
5. Shirlaw v. Southern Foundries (1926), Ltd., [1939] 2 KB 206
at 227. See also Merilees v. Sears Canada Inc. (1986)
CanLII 723 (BCSC) at 169; aff ’d 1988 CanLII 3009
(BCCA).
6. J. McCamus, The Law of Contracts, 2nd ed (Toronto: Irwin,
2012) at 779-89.
7. For example, in RBC Dominion Securities Inc. v. Merrill
Lynch Canada Inc., 2008 SCC 54 the court implied a term
into the contract of an investment manager that he would
retain investment managers under his supervision and not
coordinate their mass exit to join a competitor; and in
Bonsma v. Tesco Corporation, 2013 ABCA 367, applying the
business efficacy test, there was no reason to imply a duty
on the employer to provide minimum hours of work to an
employee in a job that provides cyclical and sporadic work.
8. See Rose v. Shell Canada Ltd., 1985 CanLII 675 (BCSC),
referring to a contract term implied by fact based on a
long history of practice as a contract “term by conduct.”
See also Sowden v. Manulife Canada Ltd., 2015 BCSC 629.
9. Elliott v. Southam Inc., 1998 CanLII 3482 (Alta. QB).
10. See Machtinger v. HOJ Industries Ltd., [1992] 1 SCR 986 at
1008.
11. Ibid. See also TCF Ventures Corp. v. The Cambie Malone’s
Corporation, 2017 BCCA 129 at paras 19-20; and Liverpool
City Council v. Irwin, [1977] AC 239.
12. Collins, supra note 1 at 34; and A. Fox, Beyond Contract:
Work, Power, and Trust Relations (London: Faber, 1974) at
181-84.
13. G. England, Individual Employment Law (Toronto: Irwin,
2008) at 38. See also Wilson v. Racher, [1974] IRLR 114
(CA) at para 5, where Edmund-Davies LJ explains how judicial attitudes on the appropriate treatment of employees
by employers has evolved over time to reflect changing
“social conditions.”
14. See D. Doorey, “Employer Bullying: Implied Duties of Fair
Dealing in Canadian Employment Contracts” (2005) 30
Queen’s LJ 500.
15. Laws v. London Chronicle (Indicator Newspapers) Ltd.,
[1959] 2 All ER 285 (CA). See also Hivac Ltd. v. Park Royal
Scientific Instruments, [1946] 1 All ER 350 at 353.
16. Panton v. Everywoman’s Health Centre Society (1988), 2000
BCCA 621; Adams v. Fairmont Hotels & Resorts Inc., 2009
BCSC 681; Candy v. C.H.E. Pharmacy Inc., 1997 CanLII
4135 (BCCA); Staley v. Squirrel Systems of Canada, 2013
BCCA 201 (implied term that the employee work in
British Columbia was violated when then employee insubordinately refused an employer order to return to BC after
a short-term period in Quebec); and Streng v. Northwestern Utility Construction Ltd., 2016 BCPC 161 at para 57.
17. Stein v. British Columbia Housing Management Commission, 1992 CanLII 4032 (BCCA).
18. See discussion in Chapter 13; Mifsud v. MacMillan
Bathurst Inc., 1989 CanLII 260 (Ont. CA).
19. Bolibruck v. Niagara Health System, 2015 ONSC 1595.
20. Ibid.; see also Marmon v. The Authentic T-Shirt
Company, 2019 ONSC 205 (where the employee had been
reassigned temporarily to different jobs with the same pay
in the past, it was an implied term that the employer could
do so); Gillespie v. Ontario Motor League Toronto
Club (1988), 4 ACWS (2d) 87 (Ont. H Ct J); Tymrik v.
Viking Helicopters Ltd. (1985), 6 CCEL 225 (Ont. H Ct J);
Canadian Bechtel Ltd. v. Mollenkopf (1978), 1 CCEL 95
(Ont. CA); Dykes v. Saan Stores Ltd., 2002 MBQB 112;
Farber v. Royal Trust Company, [1997] 1 SCR 846; and
Tanton v. Crane Canada Inc., 2000 ABQB 837.
21. RBC Dominion Securities Inc. v. Merrill Lynch Canada Inc.,
supra note 7; Zoic Studios B.C. Inc. v. Gannon, 2015 BCCA
334; Altam Holdings Ltd. v. Lazette, 2009 ABQB 458; and
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150 Part II The Common Law Regime
CRC-Evans Canada Ltd. v. Pettifer, 1997 CanLII 14943
(Alta. QB).
22. Secretary of State for Employment v. ASLEF (No. 2), [1972]
2 All ER 949 (CA).
23. Ibid. See also S. Honeyball, Employment Law, 12th ed
(Oxford: Oxford University Press, 2012) at 63-64.
24. CRC-Evans Canada Ltd. v. Pettifer, supra note 21.
25. See RBC Dominion Securities Inc. v. Merrill Lynch Canada,
2003 BCSC 1773; rev’d on other grounds, supra note 7.
See also Gill v. A & D Precision Ltd., 2010 ONSC 4646;
Tree Savers International Ltd. v. Savoy, 1992 CanLII 2828
(Alta. CA); and Consbec Inc. v. Walker, 2016 BCCA 114
(the damages suffered due to the employee’s failure to give
notice were offset by savings to the employer in not having
to pay the employee’s wages during the notice period).
26. RBC Dominion Securities Inc. v. Merrill Lynch Canada Inc.,
supra note 7 at para 38; Hivac, Ltd. v. Park Royal Scientific
Instruments, [1946] 1 All ER 350, c. 169; Imperial Sheet
Metal Ltd. v. Landry and Gray Metal Products Inc., 2007
NBCA 51; McMahon v. TCG International Inc., 2007 BCSC
1003; Restauronics Services Ltd. v. Nicolas, 2004 BCCA 130
(making plans to compete against the employer after the
employment ends is not a breach of the duty of fidelity);
Cariboo Press (1969) Ltd. v. O’Connor, 1996 CanLII 1553
(BC CA); Amber Size & Chemical Co., Ltd., v. Menzel,
[1913] 2 Ch. 239; Rupert v. Greater Victoria School District
No. 61, 2003 BCCA 706; Tree Savers International Ltd. v.
Savoy, supra note 25; Atlas Janitorial Services v. Germanis,
1994 CanLII 7522 (Ont. Sup Ct J); and Altam Holdings Ltd.
v. Lazette, supra note 21.
27. RBC Dominion Securities v. Merrill Lynch Canada, supra
note 7 at para 18.
28. Ibid. Partridge v. Botony Dental Corporation, 2015 ONSC
343; Quantum Management Services Ltd. v. Hann, 1992
CanLII 7720 (Ont. CA); Cinema Internet Networks Inc. v.
Porter et al., 2006 BCSC 1843; Lac Minerals Ltd. v. International Corona Resources Ltd., [1989] 2 SCR 574; Zoic
Studios BC Inc. v. Gannon, 2012 BCSC 1322; and Barton
Insurance Brokers v. Irwin, 1999 BCCA 73. Sometimes
courts refer to an implied “duty of confidence” that
requires employees to protect an employer’s confidential
information and not to use that information to harm the
employer’s economic interests. See discussion on “Intellectual Property and Work” and other additional online
content discussed on page xxiii in the preface of this book;
and see Corona Packaging Inc. v. Singh, 2012 ONSC 2746.
29. Pereira v. The Business Depot Ltd., 2011 BCCA 361;
Fleming v. J.F. Goode & Sons Stationers & Office Supplies Ltd., 1994 CanLII 4361 (NSSC); Riley v. Crown Trust
Co. (1977), 5 AR 1 (QB); and S.S. v. Huang & Danczkay
Property Management Inc., 1999 CanLII 14865 (Ont.
Sup Ct J).
30. Pinto v. BMO Nesbitt Burns Inc., 2005 CanLII 18720 (Ont.
Sup Ct J); McKinley v. BC Tel, 2001 SCC 38; Swidrovich v.
Saskatchewan Place Association Inc., 2019 SKQB 50; Obeng
v. Canada Safeway Ltd., 2009 BCSC 8 (employee has an
implied obligation to provide an honest and candid explanation for his actions as part of an investigation into
misconduct); and Bhasin v. Hrynew, 2014 SCC 71 (recognizing a general implied duty in Canadian contracts to
perform with honesty and in good faith).
31. Atlas Janitorial Services Co. v. Germanis, supra note 26.
32. Carroll v. Emco Corporation, 2007 BCCA 186. The courts
have not usually required employees to disclose misconduct by other employees; see Tyrrell v. Alltrans Express
Ltd., 1976 CanLII 1181 (BCSC); Bhasin v. Best Buy Canada
Ltd., 2005 CanLII 45965 (Ont. Sup Ct J); and Bell v. Computer Science Corp, 2007 ONCA 466.
33. R v. Arthurs, Ex p. Port Arthur Shipbuilding Co., 1967
CanLII 30 (Ont. CA): “If an employee has been guilty of
serious misconduct, habitual neglect of duty, incompetence,
or conduct incompatible with the duties, or prejudicial to
the employer’s business, or if he has been guilty of wilful
disobedience to the employer’s orders in a matter of substance, the law recognizes the employer’s right summarily
to dismiss the delinquent employee.” See also Bridgewater
v. Leon’s Manufacturing Co. Ltd., 1984 CanLII 2492 (Sask.
QB); Burden v. Bank of Nova Scotia, 1997 CanLII 2125
(BCSC); Murrell v. Simon Fraser University, 1997 CanLII
2785 (BCCA); and Brown v. Sears Ltd., 1988 CanLII 153
(NSSC). See also the discussion in Honeyball, supra note
23 at 67.
34. Anstey v. Canadian National Railway Co., [1980] 74 APR
95 (Nfld. CA); and Rose v. Marystown Shipyard Ltd., 1985
CanLII 1829 (Nfld. CA). See also Dziecielski v. Lighting
Dimensions Inc., 2012 ONSC 1877 (drinking and driving is
also a violation of an implied term of the employment
contract).
35. Examples of cases in which intoxication is not grounds for
summary dismissal including the following: Wiebe v.
Central Transport Refrigeration (Man.) Ltd., 1994 CanLII
6406 (Man. CA); Ditchburn v. Landis & Gyr Powers Ltd.,
1997 CanLII 1500 (Ont. CA); and Patzner v. Piller Sausages
& Delicatessens Ltd., [1990] 19 ACWS (3d) 536 (Ont. DC).
Cases in which intoxication caused performance problems
include the following: MacDonald v. Azar, 1947 CanLII
312 (NSSC) (intoxication led to poor performance); and
Cox v. Canadian National Railway Company (1988), 84
NSR (2d) 271 (SC).
36. See, e.g., Bannister v. General Motors of Canada Ltd., 1998
CanLII 7151 (Ont. CA); Foerderer v. Nova Chemicals Corporation, 2007 ABQB 349; Fleming v. Ricoh Canada Inc.,
2003 CanLII 2435 (Ont. Sup Ct J); and Clarke v. Syncrude
Canada Ltd., 2013 ABQB 252.
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Chapter 9 Implied and Ancillary Employment Contract Terms 151
37. Simpson v. Consumers’ Assn. of Canada, 2001 CanLII
23994 (Ont. CA); and Gonsalves v. Catholic Church Extension Society of Canada, 1998 CanLII 7152 (Ont. CA).
38. Bannister v. General Motors of Canada, supra note 36; and
Alleyne v. Gateway Co-operative Homes Inc., 2001 CanLII
28308 (Ont. Sup Ct J).
39. Smith v. Baker & Sons, [1891] AC 325. See also Ainslie
Mining & Railway Co. v. McDougall, [1909] 42 SCR 420;
Matthews v. Kuwait Bechtel Corp., [1959] 2 QB 57; Marshment v. Borgstrom, [1942] SCR 374; and Regal Oil & Refining Co. et al. v. Campbell (1937), 2 DLR 609. See also the
discussion in E. Tucker, “The Law of Employer’s Liability
in Ontario 1861 – 1900: The Search for a Theory” (1984) 22
Osgoode Hall LJ 213.
40. See Doorey, supra note 14.
41. In 1909, the Saskatchewan Court of Appeal ruled
that employees are entitled to “decent treatment at the
hands of the Master”: Berg v. Cowie, 1918 CanLII 319
(Sask. CA). In a 1974 British decision called Wilson v.
Racher, supra note 13, Edmund-Davies LJ said that a
“contract of service imposes upon the parties a duty of
mutual respect.”
42. Sweeting v. Mok, 2015 ONSC 4154; Morgan v. Chukal
Enterprises, 2000 BCSC 1163; Saunders v. Chateau Des
Charmes Wines Ltd., 2002 CanLII 5114 (Ont. Sup Ct J);
Stamos v. Annuity Research & Marketing Service Ltd., 2002
CanLII 49618 (Ont. Sup Ct J); and Ulmer Chevrolet
Oldsmobile Cadillac Ltd. v. Kowerchuk, 2005 SKPC 18. See
also Lamb v. Gibbs Gage Architects, 2011 ABPC 315; and
Colistro v. Tbaytel, 2019 ONCA 197 at para 50 (noting the
term could be applied to the employer’s decision to rehire
an employee who years before had sexually harassed
co-workers).
43. Hanni v. Western Road Rail Systems (1991) Inc., 2002
BCSC 402.
44. Vandooyeweert v. Jensten Foods Ltd., 2002 BCPC 442.
45. Prabhakaran v. Town of Fort Macleod, 2010 ABPC 35.
46. Boucher v. Wal-Mart Canada Corp., 2014 ONCA 419. See
also Potter v. New Brunswick Legal Aid Services Commission, 2015 SCC 10, in which the Supreme Court of Canada
recognized and developed an implied contractual obligation to perform the contract with honesty and in good
faith; and Bhasin v. Hrynew, supra note 30 (the court recognized an “overriding principle,” not an implied term,
that contracts will be performed in good faith and with
honesty. Since this is not an implied term, the parties
cannot contract out of it). See also Karmel v. Calgary
Jewish Academy, 2015 ABQB 731; and D. Doorey, “Court
of Appeal Confirms an Implied Obligation of Good Faith
and Fair Dealing in Employment Contracts,” online, Law
of Work (blog): <http://lawofwork.ca/?p=7487>.
47. McCamus, supra note 6 at 783-84.
48. On temporary layoffs, see McLean v. The Raywal
Limited Partnership, 2011 ONSC 7330; Davies v.
Fraser Collection Services Ltd., 2008 BCSC 942; Damery
v. Matchless Inc., 1996 CanLII 5518 (NSSC); Trites v.
Renin Corp, 2013 ONSC 2715; Stolze v. Addario, 1997
CanLII 764 (Ont. CA); Michalski v. Cima Canada Inc.,
2016 ONSC 1925; Elsegood v. Cambridge Spring
Service (2001) Ltd., 2011 ONCA 831; Bevilacqua v.
Gracious Living Corporation, 2016 ONSC 4127;
Collins v. Jim Pattison Industries Ltd., 1995 CanLII 919
(BCSC); Rodger v. Falcon Machinery (1965) Ltd., 2006
MBQB 216; and Vrana v. Procor Ltd., 2003 ABQB 98. On
unpaid suspensions, see Carscallen v. FRI Corp., 2006
CanLII 31723 (Ont. CA); Henderson v. Saan Stores Ltd.,
2005 SKQB 34; and Hanley v. Pease & Partners, [1915]
1 KB 698 (Div Ct).
49. See, e.g., Michalski v. Cima Canada Inc., supra note 48
(“The right to impose a layoff as an implied term must be
notorious, even obvious, from the facts of a particular
situation”).
50. Damery v. Matchless Inc., supra note 48; and Rodger v.
Falcon Machinery, supra note 48.
51. Martellacci v. CFC/INX Ltd., 1997 CanLII 12327 (Ont. SC)
at para 29: “It is difficult to imagine a more fundamental
term of employment than that the employee be paid his or
her salary.”
52. Carscallen v. FRI Corp., supra note 48.
53. See the discussion of quantum meruit in the employment
context in Maver v. Greenheat Energy Corporation, 2012
BCSC 1139; O’Neill v. Rentokil Canada, 2000 BCSC 1520;
Odo v. Island Publishers Ltd., 2000 BCSC 499; and O’Brien
v. Buffalo Narrows Airways, 1998 CanLII 13764 (Sask. QB).
54. Honda Canada Inc. v. Keays, 2008 SCC 39; Wallace v.
United Grain Growers Ltd., [1997] 3 SCR 701. See discussion and further cases in Chapter 14.
55. See Rahemtulla v. Vanfed Credit Union, 1984 CanLII 689
(BCSC) at para 22.
56. See Teskey v. Great West Life Assurance Co., 2001 ABQB 1060.
57. Some examples include Rahemtulla v. Vanfed Credit Union,
supra note 55; Ellison v. Burnaby Hospital Society, 1992
CanLII 391 (BCSC); Starcevich v. Woodward’s Ltd., 1991
CanLII 330 (BCSC); Taylor v. Canada Safeway Ltd., 1998
CanLII 1472 (BCSC); McLaren v. Pacific Coast Savings
Credit Union, 2001 BCCA 388; McLean v. The Raywal
Limited Partnership, supra note 48; Corey v. Dell Chemists
(1975) Ltd., 2006 CanLII 19435 (Ont. Sup Ct J); and
Cheong v. Grand Pacific Travel & Trade (Canada) Corp.,
2016 BCSC 1321.
58. See also Wiebe v. Central Transport Refrigeration (Man.)
Ltd., supra note 35 at para 29; Starcevich v. Woodward’s
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152 Part II The Common Law Regime
Ltd., supra note 57; Ellison v. Burnaby Hospital Society,
supra note 57; Cheong v. Grand Pacific Travel & Trade
(Canada) Corp., supra note 57.
59. Rahemtulla v. Vanfed Credit Union, supra note 55 at para
20. See also Fernandez v. The University of British
Columbia, 2018 BCSC 1993; Cheong v. Grand Pacific Travel
& Trade (Canada) Corp., supra note 57; McLean v.
The Raywal Limited Partnership, supra note 48; and
Kohler Canada Co. v. Porter, 2002 CanLII 49614
(Ont. Sup Ct J).
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C H A P T E R 10
Termination by an Employer
with “Reasonable Notice”
LEARNING OBJECTIVES
CHAPTER OUTLINE
After reading this chapter, students will be able to:
I. Introduction 153
II. Employee Vulnerability and the Rules Governing Termination of
Employment Contracts 155
III. A Brief History of the Origins of Implied Reasonable Notice 156
IV. How Modern Canadian Courts Assess an Employer’s Duty to Provide
Reasonable Notice of Termination 158
A. The “Bardal Factors” 159
B. Summary of the Bardal Factors 160
C. Other Factors Affecting the Length of Reasonable Notice 165
IV. Chapter Summary 166
Questions and Issues for Discussion 166
Exercise 167
Notes and References 167
• Explain the development of the implied obligation on employers
to provide employees with “reasonable notice” before terminating
the employment contract.
• Recognize the difference between the default model of
termination of employment contracts in Canada and the United
States.
• Identify and explain the factors that judges consider in assessing
how much notice is “reasonable.”
• Recognize how changes in the economic and market subsystem
can influence how judges assess reasonable notice.
I. Introduction
Every employment contract must come to an end. In most cases, the termination of the contract
gives rise to no legal disputes. For one reason or another, the parties decide to part ways, and the
split is amicable. Maybe the employer even writes a nice reference letter to help the employee
find a new job. Sometimes the employee retires, and there is a cake.
However, most work-related disputes that reach the courts deal with issues arising from the
termination of contracts. Over the next several chapters, we will explore how the common law
regime deals with disputes about the termination of employment contracts. The end of the contract can come about in a variety of ways, as depicted in Figure 10.1, each of which can give rise
to potential legal issues. In Chapter 8 we considered how the parties to an employment contract
can define the conditions under which the contract terminates in expressed contract language,
and how even then disagreements can arise that lead to lawsuits. In this chapter, we will consider
the relatively common situation in which an employer terminates an employment contract by
providing the employee with “reasonable notice” of termination.
In the common law regime, an employer is presumed to have the right to terminate an
employment contract at any time by giving the employee notice of the termination. There are
exceptions, some of which we have considered already (fixed-term/fixed-task contracts) and
some we will learn later (summary dismissal for cause in Chapter 12). However, most of the time
employers terminate employment contracts by providing the employee with notice of that termination. As noted previously, notice can be working notice (the employee just keeps working
until the notice period is over) or pay “in lieu of notice” (the employee goes home and the employer pays the employee what they would have earned had they kept working).
153
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154 Part II The Common Law Regime
FIGURE 10.1
Methods of Terminating Employee Contracts
How the
Contract Ends
Means of
Termination
Common Legal
Issues
Agreement of the
parties in an
expressed contract
term
(Chapter 8)
Fixed-term or fixed-task contract clause.
Notice of termination clause.
Retirement clause.
• Is the clause clear and unambiguous?
• Does the clause violate a statute?
• Is the contract term “unconscionable,” or
does the changed substratum doctrine
apply?
Frustration of
contract
(Chapter 11)
An unforeseen event makes
performance of the contract impossible.
• Do circumstances fall within the
doctrine of “frustration”?
Employer terminates
with “reasonable
notice”
(Chapter 10)
The employer provides working
“reasonable notice” of termination or
“pay in lieu of that notice.”
Wrongful dismissal:
• Did the employer provide enough
notice?
• How much notice is “reasonable notice”?
Summary dismissal:
employer terminates
for cause
(Chapter 12)
The employer alleges the employee
repudiated the contract, and so
dismisses the employee with no notice.
Summary dismissal:
• Did the employee breach the contract
and if so was the misconduct serious
enough to constitute repudiation of the
contract?
Constructive
dismissal
(Chapter 13)
The employee alleges that the employer
repudiated the contract, and so quits
and claims damages for loss of
entitlement to notice of termination.
• Did the employer repudiate the
contract? If so, how much notice was
required?
The employee terminates the
employment contract.
• Did the employee really quit?
• How much notice is required?
Resignations:
Employee terminates
with notice
(Chapter 15)
The main legal question that arises is how much notice is required. The contract might provide the answer, as discussed in Chapter 8, in the form of a notice of termination clause, so we
should always start by looking at the written contract if one exists. Provided that clause is unambiguous, does not run afoul of employment standards statutes, and is not unconscionable
(see Chapter 8), the courts will enforce that clause. However, many employment contracts
include no notice of termination clause, or they include a notice clause that is ruled to be unlawful by the courts for reasons discussed in Chapter 8. In these cases, the courts imply a term
requiring “reasonable notice” of termination of the employment contract, as we learned in
Chapter 9. This chapter examines how the courts determine what constitutes reasonable notice.
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Chapter 10 Termination by an Employer with “Reasonable Notice” 155
The question of whether an employer provided an employee with reasonable notice of termination is probably the most litigated issue in the common law of the employment contract.
II. Employee Vulnerability and the Rules Governing Termination of
Employment Contracts
Let’s begin our discussion with some brief but important observations about how concerns over
employee vulnerability have influenced the approach of the courts to the termination of employment contracts. The legal rules that apply to the termination of employment contracts are
derived from the rules of contract law more generally. Therefore, contract law concepts (such as
repudiation of contract) are important, and we will need to learn about them. However, judges
have also applied contract law concepts with an eye on the special nature of the employment
relationship. A contract for human labour is not the same as a contract for renting or supplying
goods, judges have stated, because work is so central to our sense of personal worth and identity.
Moreover, workers are often in a position of vulnerability, both at the time the labour contract
is initially created and particularly at the time when the contract is terminated.
Box 10.1 describes important examples of how the Supreme Court of Canada has incorporated concerns over employee vulnerability in the work relationship into the exercise of interpreting employment contracts.1 The point is not that normal contract law principles are cast aside
in employment contract disputes. It is subtler than that. Judges are mindful that, as the more
powerful party, employers write most employment contracts, that little negotiation takes place
when contracts are created, and that significant economic and social costs are often associated
with job loss. This reality sometimes serves as a backdrop when judges are asked to assess
whether an employment contract was terminated properly. Judges’ concern about protecting
vulnerable employees, particularly in recent decades, has occasionally influenced judicial reasoning and outcomes, no more so than in their interpretations of contractual rules governing
the termination of employment contracts.
BOX 10.1 » TALKING WORK LAW
The Supreme Court of Canada and Employee Vulnerability Under Employment Contracts
Comments by Supreme Court of Canada judges have had great
influence on the development of the law of employment
contracts. In a series of decisions over the past 30 years, the
Supreme Court has emphasized the need for the common law
of employment contracts to develop with consideration of the
inherent vulnerability of employees. This outlook is perhaps
most evident in cases relating to termination of the employment contract.
For example, in Machtinger v. HOJ Industries Ltd. (see Box
8.6), the court referred to the “policy considerations” that ought
to influence judges when interpreting employment contracts
and made the following (now often-cited) observations:
Re Public Service Employee Relations Act (Alta.), [1987]
1 S.C.R. 313 …:
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.
I would add that not only is work fundamental
to an individual’s identity, but also that the manner
in which employment can be terminated is equally
important.*
[E]mployment is of central importance to our society. As [Chief Justice] Dickson … noted in Reference
Referring to the purpose of the Employment Standards Act,
the Supreme Court in Machtinger also wrote:
repudiation of contract: A breach of contract that demonstrates an intention by the party to treat the contract as at an end
and to no longer be bound by the contract.
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156 Part II The Common Law Regime
The harm which the Act seeks to remedy is that individual employees, and in particular non-unionized
employees, are often in an unequal bargaining position in relation to their employers. As stated by
[Professor] Swinton …:
[T]he terms of the employment contract rarely
result from an exercise of free bargaining power
in the way that the paradigm commercial exchange between two 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.†
In Wallace v. United Grain Growers Ltd., decided five years
after Machtinger, the Supreme Court again emphasized the
inequality of bargaining power that defines employment
contracts, citing with approval the following often-quoted
passage from Oxford law professors Paul Davies and Mark
Freedland, Kahn-Freund’s Labour and the Law:
[T]he relation between an employer and an isolated
employee or worker is typically a relation between
a bearer of power and one who is not a bearer of
power. In its inception it is an act of submission, in
its operation it is a condition of subordination.‡
The court then noted the following:
The point at which the employment relationship
ruptures is the time when the employee is most
vulnerable and hence most in need of protection. In
recognition of this need, the law ought to encourage
conduct that minimizes the damage and dislocation
(both economic and personal) that result from
dismissal.§
As we work through the next several chapters that explore
termination of employment contracts, notice how judges’
concern for employee vulnerability has shaped how the common law deals with termination of the employment
contract.
* Machtinger v. HOJ Industries Ltd., [1992] 1 SCR 986 at 1002. See also
Potter v. New Brunswick Legal Aid Services Commission, 2015 SCC 10 at
para 83.
† Ibid. at 1003.
‡ Wallace v. United Grain Growers Ltd., [1997] 3 SCR 701 at para 92.
§ Ibid. at para 95.
III. A Brief History of the Origins of Implied Reasonable Notice
By the early 1890s, British judges had adopted the presumption that employment contracts were
for an indefinite period, unless otherwise indicated in the contract or a statute.2 This replaced
an earlier presumption that employment contracts were for a one-year fixed term, unless otherwise indicated. The 1911 edition of the leading British legal text Halsbury’s Laws of England
summarized the state of employment law as follows: “If no custom nor stipulation as to notice
exists, and if the contract of service is not one which can be regarded as a yearly hiring, the service is terminable by reasonable notice.”3
Canada inherited the British common law of the employment contract, but there was little
“employment” and few employment contract lawsuits prior to the 1900s (see Chapter 5). Canada
was a vast, underpopulated country with many opportunities for property ownership. When
people performed work for others, they tended to do so only long enough to amass sufficient
funds to purchase their own land. Although few employment contract lawsuits existed at the
time, in 1898 the Supreme Court of Canada clarified that the presumption of annual hire (i.e., a
contract duration of one year) did not exist in Canadian employment contracts, and that the
matter of contract length was a factual issue to be decided based on the evidence in each case.4
In the 1908 decision Speakman v. City of Calgary, an Alberta judge ruled that an employee
was entitled to reasonable notice of termination, and that the amount of notice depended on a
variety of factors, including the employee’s “class” and “general standing in the community,” and
“the probable facility or difficulty the employee would have in procuring other employment.”5
This reference to the “class” of employee may seem dated, but the idea that “lower classes” of
workers deserve a lesser period of reasonable notice has played an important role in the development of the law in this area to modern times. So too has an assessment of the “difficulty the
employee would have in procuring other employment,” as we will discuss shortly.
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Chapter 10 Termination by an Employer with “Reasonable Notice” 157
By the 1920s, the presumption that employment contracts were of indefinite duration and
could be terminated by reasonable notice had taken root in Canada. This approach was confirmed in the 1936 decision Carter v. Bell, where the Ontario Court of Appeal ruled that “there
is implied in the contract of hiring an obligation to give reasonable notice of an intention to
terminate the arrangement.”6 It is important to emphasize again that the implied requirement to
give reasonable notice only exists if the parties have not otherwise agreed to a different, lawful
notice formula.
BOX 10.2 » TALKING WORK LAW
The Divergent Approaches of Canada and the United States: “Reasonable Notice” Versus the
“At Will” Employment Contract
least not completely accurate, in his description of the law as
An enduring mystery in comparative employment law is why
it existed in the late 1800s.† Other scholars have rejected as
Canada and the United States went in such diametrically opposed directions on the rules surrounding the termination of
“myth” the claim that the courts adopted the “at will” presumpemployment contracts.
tion because of a mistaken assumption that Wood was correct.
Both countries inherited the British common law model.
They argue that Wood was indeed correct, and American
Canada ultimately adopted the presumption of indefinite-term
courts had always treated employment contracts as “at will.”‡
employment contracts terminable by reasonable notice that
Why the courts did so is a matter of debate among these
had emerged in Britain by the late 1800s. However, American
scholars. One argument is that the courts wanted to protect
courts went in a different direction and developed a presumpemployers from attempts by the growing number of mid-level
tion that employment contracts have a length of one second,
managers in the late 19th century to claim their contracts
terminable at any moment, with no notice required at all. This
included some form of job security, either in the form of a fixed
type of contract is known as an “at will” employment
duration or a notice of termination requirement.§
contract.
More than one theory exists on why
Canada and the United States have taken
such different paths. The predominant
theory espoused by American legal scholars is that, until the late 1880s, American
courts were either following the British
presumption of annual hiring contracts or
making no presumption of contract duration at all and treating duration of contract
as a factual issue that turned on the facts
in each case. Then, in 1877, lawyer Horace
Wood published a book concluding that
American law followed the presumption
that employment contracts were “at will.”*
Thereafter, American judges cited Wood’s
text as the authority for the “at will” presumption, which requires no notice of
termination.
Many American scholars have since
A threshing crew takes a break from their toil on a Saskatchewan farm, 1911.
argued that Wood was in fact wrong, or at
“at will” employment contract: An employment contract in which either party may terminate the contract at any time, for
any or no reason, with no notice to the other party. This is the default model in the United States. In Canada, employment standards legislation requires notice of termination and therefore prohibits at will contracts for employees covered by the legislation.
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158 Part II The Common Law Regime
Another theory asserts that “free” workers or employers in
19th-century America made little demand for longer-term
contracts or notice requirements. Due to labour shortages in
agriculture, most workers preferred the flexibility of being
able to leave at any time for a higher paying job or because
they had earned enough to purchase their own land.** Employers were also happy not to have contractual obligations
to keep workers when there was no work. This theory does
not explain why Canadian courts adopted the reasonable
notice rule under essentially the same labour market
conditions.
Another theory argues that US judges adopted “at will” to
relieve the courts from having to deal with employment contract cases.# “At will” simplified employment contract law, reducing the need for court intervention.
Finally, some scholars have argued that the British and
Canadian courts adopted the reasonable notice rule as a
means of controlling unions. If a contract included a requirement for employees to provide the employer with reasonable
notice that they were quitting, then a sudden strike (walking
off the job) was a breach of the contract. As a result, a notice
requirement gave courts the option of punishing employees
who struck as well as union organizers who encouraged workers to strike through the tort of “inducing breach of contract,”
which we consider in Chapter 16.†† According to this theory,
American unions used the “sudden strike” weapon far less
frequently than British and Canadian unions and workers. As
a result, little need existed for American employers and the
courts to rely on notice provisions in contracts as a weapon
to restrain the burgeoning labour movement.
The “at will” rule in the United States has been subject to
constant criticism over the years for leaving workers vulnerable
and without any job security. Many statutory and even judgemade restrictions on the rule have been developed over the
years. Some scholars have argued that American law should
move toward the Canadian/British system of requiring notice.‡‡ Others have supported the “at will” approach as being
best for the economy and “individual liberty.”§§
* H. Wood, A Treatise on the Law of Master and Servant Covering the
Relation, Duties, and Liabilities of Employers and Employees (Albany, NY:
John D. Parsons Jr., 1877) at 272: “the rule is inflexible, that a general or
indefinite hiring is prima facie a hiring at will, and if the servant seeks to
make it out a yearly hiring, the burden is upon him to establish it by
proof.”
† See P. Shapiro & J. Tune, “Implied Contract Rights to Job Security” (1974)
26 Stan L Rev 335; S. Jacoby, “The Duration of Indefinite Employment
Contracts in the United States and England: An Historical Analysis”
(1982) 5 Comp Lab LJ 85; and B. Etherington, “The Enforcement of
Harsh Termination Provisions in Personal Employment Contracts: The
Rebirth of Freedom of Contract in Ontario” (1989 – 90) 35 McGill LJ 459.
‡ See, e.g., D. Ballam, “Exploding the Original Myth Regarding
Employment-at-Will: The True Origins of the Doctrine” (1996) 17
Berkeley J Emp & Lab L 91; and J. Fienman, “The Development of the
Employment-at-Will Rule Revisited” (1991) 23 Ariz St LJ 733.
§ Fienman, ibid.
** Ballam, supra note ‡ at 128-30.
# A. Morriss, “Exploding Myths: An Empirical and Economic Reassessment
of the Rise of Employment at Will” (1994) 59:3 Mo L Rev 683.
†† Etherington, supra note † at 472-73; Jacoby, supra note † at 120-26.
‡‡ R. Arnow-Richman, “Mainstreaming Employment Contract Law: The
Common Law Case for Reasonable Notice of Termination” (2013) 66 Fla
L Rev 1513.
§§ R. Epstein, “In Defense of the Contract at Will” (1984) 51 U Chicago L Rev
947.
IV. How Modern Canadian Courts Assess an Employer’s Duty to
Provide Reasonable Notice of Termination
A lawsuit by an employee alleging that an employer terminated an employment contract without
providing the employee with reasonable notice is known as a wrongful dismissal lawsuit. How
much notice is “reasonable,” and on what basis do judges make that decision? One option is to
imagine what the parties themselves would have thought was reasonable, had they considered
the issue, when they were making the contract. This approach was taken in the 1961 case of
Lazarowicz v. Orenda Engines Ltd., in which the Ontario Court of Appeal stated:
Opinions might differ as to what was reasonable, but in reaching an opinion a reasonable test would
be to propound the question, namely, if the employer and the employee at the time of the hiring had
addressed themselves to the question as to the notice that the employer would give in the event of
him terminating the employment, or the notice that the employee would give on quitting, what
would their respective answers have been?7
wrongful dismissal: A type of lawsuit by an employee against a former employer alleging that the employer terminated their
contract without complying with the implied term in the contract requiring “reasonable notice.”
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Chapter 10 Termination by an Employer with “Reasonable Notice” 159
The court of appeal is saying here that the requirement to provide reasonable notice is a
contract term implied “in fact” (see Chapter 9). On this approach, judges must (metaphorically)
hop in a time machine and go back to the time of the formation of the contract to ask what the
parties would have agreed to had they bothered to write down a term explaining how much
notice should be given to the other party in the event of a termination of the contract.8 Judges
still sometimes refer to the supposed intentions of the parties when they determine the amount
of reasonable notice.9
A. The “Bardal Factors”
However, the approach in Lazarowicz raises the obvious question: How does the judge know
what the parties would have agreed to back when they bargained the contract? In most cases, as
we have discussed before, the employer would probably draft a notice of termination clause that
suits its own interests, and the employee would simply sign on the dotted line. Therefore, a judge
might reasonably conclude that if the parties had bothered to write a notice term down, they
would have written one requiring no notice at all—like an American “at will” contract—or at
least very little notice.
Although that outcome is fine from a purely contract law perspective, it would also leave
employees with little or no opportunity to plan for the end of the contract by starting to look for
new work. Most Canadian judges have preferred to approach the calculation of reasonable
notice from a policy perspective, seeking to balance the interest of employers in workplace flexibility and employees’ interest in having a “cushion” to plan for the transition between jobs.10
That approach has been captured by the application of the Bardal factors.
Bardal v. Globe & Mail Ltd. described the factors judges are to consider in calculating reasonable notice. Justice McRuer ruled that in assessing how much notice is “reasonable,” judges
should use their judgment, keeping in mind a number of key criteria, which are presented in
Box 10.3. Although the Bardal decision was issued by a lower level of court than Lazarowicz, the
Bardal approach was later approved by appellant courts, and it has become the leading Canadian
authority in guiding judges on the assessment of reasonable notice.11
BOX 10.3 » CASE LAW HIGHLIGHT
Factors to Consider in Assessing Reasonable Notice
Bardal v. Globe & Mail Ltd.
1960 CanLII 294 (Ont. Sup Ct J)
Key Facts: Bardal was an advertising manager with 16.5 years
of service when his contract was terminated. His employment
contract was silent (it said nothing) about how much notice
was required to terminate the contract.
Issue: How much notice of termination was the employer
obligated to provide Bardal?
Decision: The court ruled that one year was “reasonable notice” considering how long Bardal had been employed, his
position, and other factors. Here is the passage from that decision, which is now cited in most Canadian cases in which the
length of reasonable notice is being assessed:
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 the employment, 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.
Bardal factors: Criteria considered by Canadian courts in assessing the length of time required by the implied obligation to
provide “reasonable notice” of termination of an employment contract. The name comes from the leading decision called Bardal
v. Globe and Mail Ltd., decided in 1960.
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160 Part II The Common Law Regime
The Bardal approach makes no mention of the “intention of the parties.” Factors such as
“availability of similar employment” and “length of service” are not even known at the time the
parties are negotiating the contract.12 The Bardal factors require judges to survey the situation
at the time of the termination and to calculate a reasonable period of notice based on what they
see and think is fair and reasonable in the circumstances, considering a list of factors.13 The
Ontario Court of Appeal has described the process of determining reasonable notice as “an art
not a science” and therefore “there is no one ‘right’ figure for reasonable notice. Instead, most
cases yield a range of reasonableness.”14
B. Summary of the Bardal Factors
The purpose of requiring employers to provide the employee with reasonable notice is to give
the employee an opportunity to prepare for job loss and to seek new employment.15 Therefore,
the factors listed in the Bardal decision are intended to act as a proxy for assessing how long it
might reasonably take the dismissed employee to find comparable alternative employment considering the employee’s circumstances. Reasonable notice assigns part of the social and economic costs of unemployment to employers, hopefully reducing the extent to which dismissed
workers need to draw on public assistance schemes like Employment Insurance and welfare.
This does not mean that the period of notice will match the precise time it actually takes the
employee to find a new job. Rather, judges are supposed to consider the factors listed in Bardal
and then decide “what appears to be logical, judicious, fair, equitable, sensible, and not excessive,” according to the judge.16 Table 10.1 provides a quick, cross-country sample of some recent
wrongful dismissal lawsuits and the amounts of reasonable notice ordered. There is also an
exercise at the end of the chapter that allows you to estimate reasonable notice periods.
TABLE 10.1
Recent Examples of Reasonable Notice Periods Order in Canada
Case Name
Details
Reasonable Notice Ordered
Saikaly v. Akman Construction Ltd.,
2019 ONSC 799
Office manager, 12 years’ service,
age 60
24 months
Spalti v. MDA Systems Ltd., 2018
BCSC 2296
Sales executive, 13.5 years’ service, age 55
16 months
Coppola v. Capital Pontiac Buick
Cadillac GMC Ltd., 2011 SKQB 318
Account manager, 23 months’
service, age 38
6 months
Bohnet v. Rebel Energy Services Ltd.,
2018 ABPC 131
Manager, rentals division, 3.5
years’ service, age 47
4 months
Salkeld v. 7-Eleven Canada, Inc.,
2010 MBQB 157
Sales clerk, 27 years’ service, age
50
14 months
Welch v. Ricoh Canada Inc., 2017
NSSC 174
Service technician, 25 years’
service, age 47
18 months
MacKinnon v. Helpline Inc., 2015
NBQB 159
Manager/coordinator, 16 years’
service, age 51
18 months
1. Length of Service
The most important factor in assessing the length of reasonable notice is the employee’s length
of service.17 The longer an employee’s service with an employer, the longer the period of reasonable notice required to terminate the employment contract. One judge explained that “a longterm employee has a moral claim which has matured into a legal entitlement to a longer notice
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Chapter 10 Termination by an Employer with “Reasonable Notice” 161
period.”18 In practice, Canadian courts have imposed a “soft cap” on reasonable notice of a
maximum of 20 to 24 months, and only in exceptional cases involving very long-service employees do courts order greater than 24 months’ notice.19 The majority of awards are for 12 months’
notice or less.
Some judges have tried to simplify the exercise of assessing notice periods by applying a
general “rule of thumb” approach based on one month’s notice for each year of employment, and
then adjusting upward or downward if special factual circumstances are involved.20 However,
appellant courts have rejected that approach for the reason presented in the 1999 Ontario Court
of Appeal case of Minott v. O’Shanter Development Company Ltd.: “a rule of thumb that an employee is entitled to one month’s notice for every year worked should not be applied. To do so
would undermine the flexibility that must be used in determining the appropriate notice
period.”21 Employment lawyer Barry Fisher examined hundreds of Canadian reasonable notice
cases and found evidence of the “rule of thumb” measure for employees dismissed within their
first three years of employment, but little evidence of that pattern for employees with longer
service.22
2. Age of the Employee
The courts have noted that middle-aged and older workers often have a more difficult time finding alternative employment than younger workers.23 This observation appears to be reflected in
reasonable notice awards. In a study of reasonable notice periods ordered by courts of appeal,
Professor Kenneth Thornicroft (University of Victoria) found that the age of the employee is
significant for employees over the age of 50, but not as important for employees younger than
50.24 He found that employees over age 50 received an additional three months’ notice.
3. Character of the Employment
Managerial workers have traditionally been granted longer periods of notice than non-­
managerial workers. This distinction dates back to the British class system, in which the courts
assumed that higher-ranking members of society deserve greater employment contract protections. Recall the words of the Alberta court in the 1908 Speakman case, cited above, about the
length of notice being affected by the employee’s “class” and “general standing in the community.” In modern times, the distinction between managerial and non-managerial employees
has been justified on the theory that managerial employees will have a harder time finding similar alternative employment than will lower‑level employees.25 This presumption took the form
of a court-created soft cap on reasonable notice periods whereby non-managerial employees
would usually not be entitled to a reasonable notice period longer than 12 months, whereas
managerial employees could receive up to 24 months.
However, in recent years this distinction has been questioned. The leading case that affirmed
the practice of treating managerial and non-managerial employees differently is the 1995
Ontario Court of Appeal case of Cronk v. Canadian General Insurance Co.26 Cronk was a
55-year-old clerk who was dismissed after more than 29 years’ service. She argued that the
period of reasonable notice should be 20 months, far more than the usual cap of 12 months
applied by the courts for non-managerial employees. The lower court judge (Justice James
MacPherson) concluded that it could not be assumed that non-managerial employees would
always have an easier time finding alternative employment. He believed that Cronk would have
a difficult time finding another job given her age and lack of transferrable skills. He ordered 20
months’ reasonable notice.27
The employer appealed, and the Ontario Court of Appeal overruled Justice MacPherson. It
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
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162 Part II The Common Law Regime
organization.”28 The court of appeal ruled that it would be too disruptive to employers to change
the presumption that non-managerial workers receive less notice:
The result arrived at [by Justice MacPherson] 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 of termination of employment with reasonable
certainty.29
The court of appeal ruled that Cronk was entitled to 12 months’ notice, the maximum
amount of notice “in her category.”
However, a few years later, cracks again began to appear in the distinction. In the case of
Minott v. O’Shanter Development Company Ltd., the Ontario Court of Appeal awarded a nonmanagerial maintenance worker 13 months’ reasonable notice.30 That employee had only 11
years’ service, compared with Cronk’s 29 years. In explaining the different outcomes, the court
of appeal stated that Cronk dealt only with clerical workers and did not establish an upper limit
for all non-managerial employees. The court of appeal also questioned whether having a cap for
non-managerial workers “detracts from the flexibility of the Bardal test and restricts the ability
of courts to take account of all factors relevant to each case and of changing social and economic
conditions.”
Finally, the issue came before the Ontario Court of Appeal again in the 2011 case of Di
Tomaso v. Crown Metal Packaging Canada LP, which is discussed in Box 10.4. Justice
MacPherson, now sitting on the court of appeal, wrote the decision.
BOX 10.4 » CASE LAW HIGHLIGHT
Should Managerial Employees Get More Reasonable Notice Than Non-Managerial Employees?
Di Tomaso v. Crown Metal Packaging Canada LP
2011 ONCA 469
Key Facts: Di Tomaso had worked 33 years as a non-­managerial
mechanic for Crown Metal Packaging Canada LP and was 62
years old at the time of his dismissal. The lower court judge
awarded him 22 months’ notice. The employer appealed and
argued that as a non-managerial employee, Di Tomaso was
only entitled to a maximum of 12 months’ notice, as per the
ruling in the Cronk case. (In a funny twist, Justice James
MacPherson was by this time sitting on the court of appeal
and wrote the decision for the court in Di Tomaso.)
Issue: Should the amount of reasonable notice be capped at
12 months for a non-managerial employee?
Decision: No. No automatic cap exists on reasonable notice
damages for non-managerial employees. Justice MacPherson
cited Minott as authority for this conclusion. He then repeated
what he stated in his original Cronk ruling: that there is no
logical reason why the courts should assume that “unskilled
employees deserve less notice because they have an easier
time finding alternative employment. The empirical validity
of that proposition cannot simply be taken for granted.” Each
case must be assessed on its own with consideration of the
facts and without reliance on presumptions about whether
managerial employees will have a harder time finding alternative employment.
The court of appeal upheld the lower court decision to
award 22 months’ notice to Di Tomaso.
In the Di Tomaso decision, the court of appeal noted that the “character of employment” was
of “declining relative importance” in assessing reasonable notice in Canada. Judges in Ontario
are no longer to assume that non-managerial employees will automatically get new jobs quicker
as a justification for awarding lesser reasonable notice periods, as recently confirmed by the
Ontario Court of Appeal in a case called Oudin v. Le Centre Francophone de Toronto:
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Chapter 10 Termination by an Employer with “Reasonable Notice” 163
The parties exerted a significant amount of energy disputing the true nature of the plaintiff ’s employment and the precise degree to which he could be characterized as “managerial.” It would appear that
there remains a suspicion among some that higher-level employees automatically receive greater
notice periods than lower level employees. That suspicion is misplaced. Some highly placed managers
are highly marketable and can reasonably expect to be placed quite quickly while some unskilled
workers may find unemployment uncomfortably long if they find themselves in a community with
few options. Character of employment is a factor, but is only one of several factors and there is no
presumption that lower level employees necessarily have an easier time seeking re-employment than
higher level employees.31
Since the Di Tomaso decision, courts have been more inclined to award periods of notice
longer than 12 months to non-managerial employees, particularly in Ontario but in other provinces as well.32 While in theory the approach adopted in Di Tomaso could also lead courts to
order lower notice awards for managerial employees, there is little evidence that this is happening (at least so far).
BOX 10.5 » TALKING WORK LAW
The Law of Work Framework: Gender and Reasonable Notice
Is it a coincidence that the clerical employee in Cronk was a
woman, and the employees in both the Di Tomaso and Minott
decisions were men? The employee’s gender is not listed as a
factor in Bardal, and judges rarely list the employee’s gender
as a relevant factor in assessing the length of reasonable notice. However, in a recent study, Professor Thornicroft found
that women receive smaller reasonable notice awards:
Although an employee’s gender should not be a
relevant factor in assessing reasonable notice, I
found a negative correlation between female gender and size of award. Female plaintiffs constituted
slightly more than 20% (26 individuals) of the employees in my study, and the results suggest that
female employees received about 1.5 to 1.7 months’
less notice than comparable male employees.*
In the lower court decision in the Cronk case (considered
above), Justice MacPherson ordered 20 months’ notice for a
56-year-old female clerk. In his reasons, he noted that women
have a more difficult time finding employment than men as
well as balancing family and career:
The London Life Freedom 55 television commercial
paints an attractive picture of the 55-year-old professional woman chucking it all and retreating, with
Mustang convertible and surfboard in the rear, to a
tropical paradise for a long and deserved retirement.
Alas, for most women this commercial is a fantasy.
The statistically average Canadian woman struggles
to find a job, she receives about 60-70 per cent of
the wages received by men doing the same work,
she strives to balance family and career, she worries
about losing her job, and if she does lose it she
desperately seeks to obtain a new job. Edna Cronk
was 55 years old when she was fired. But after long
years of clerical work at a very modest salary, it is
almost certain that she was not able to contemplate
the Freedom 55 Mustang convertible and surfboard.
She needs another job.†
Justice MacPherson’s comments and his decision in the
Cronk case demonstrate how a judge can be influenced by
developments and changing attitudes within the broader
social, cultural, and religious subsystem, introduced in Chapter
2. Justice MacPherson recognized that women play a greater
role than men in Canadian society in caring for family and that
this commitment is reflected in women’s labour market experiences. This understanding was the basis for his rejection
of the historical assumption that a woman in a non-­professional
job will more easily find new employment than a man in a
managerial position. Justice MacPherson’s ruling in Cronk was
overruled by the Ontario Court of Appeal in 1995, but in the
2011 case of Di Tomaso (see Box 10.4) the same court appears
to have been persuaded by Justice MacPherson’s perspective.
In wrongful dismissal cases, it is now relevant for an assessment of reasonable notice to consider whether a female employee’s potential to find new employment is affected by her
need to balance the demands of family and work. This evolution in wrongful dismissal law reflects heightened social
awareness of the challenges women face in meeting both work
and family obligations. Only time will tell whether the gender
gap in reasonable notice awards found by Professor Thornicroft will decrease.
* K.W. Thornicroft, “The Assessment of Reasonable Notice by Canadian
Appellate Courts from 2000 to 2011” (2013) 1 CLELJ 1 at 29.
† Cronk v. Canadian General Insurance Co., 1994 CanLII 7293 (Ont. Sup
Ct J) at para 20.
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164 Part II The Common Law Regime
4. Availability of Similar Employment
The final factor listed in Bardal was the “availability of similar employment, having regard to the
experience, training and qualifications of the servant.” That factor refers to the labour market
into which the dismissed employee will be entering in the search for a new job, as well as the
particular skill set the employee brings to the job search. An employee with skills that are in
wide demand (like a cashier, for example) would be expected to have an easier time finding alternative employment in their field than someone with very specialized skills not widely in
demand (like an astronaut).
Judges have wrestled with how much weight to give labour market conditions in assessing
reasonable notice. If reasonable notice is a proxy for how much time it should take a dismissed
employee to find similar alternative employment, should employees be awarded longer periods
of notice in poor economic times, and shorter periods when jobs are plentiful? The courts do
not tend to order shorter periods of notice in periods of economic boom, but the “duty to mitigate” discussed in Chapter 14 may result in the employee receiving less money in reasonable
notice damages if they get a new job quickly. The courts have more difficulty sorting out how
to deal with employees dismissed during poor economic conditions. There are competing
arguments.
On the one hand, an employee dismissed in an economic downturn will likely have a harder
time finding new employment than an employee dismissed in strong economic times. This view
has led some judges to award longer notice periods during depressed economic periods. For example, in the case of Lim v. Delrina (Canada) Corp., an accountant was dismissed in 1992, a particularly bad time for the accounting profession. An Ontario court found that the depressed
economic time was a relevant factor in assessing the length of notice required. The court ruled that
three months’ notice would have been awarded in normal circumstances, but then it added one
additional month’s notice “given the well known depressed economic conditions of the time.”33
On the other hand, employers may also be fighting for their survival in poor economic times,
and reducing their payroll might be necessary to avoid bankruptcy. In the 1982 case of Bohemier
v. Storwal International Inc., an Ontario court ruled that notice periods must consider the interests of both employers and employees.34 Extending notice periods in bad economic conditions
could unreasonably restrict employers’ ability to reduce the workforce at a reasonable cost and
would amount to the employer effectively insuring the employee against poor market conditions. Some judges interpreted Bohemier as authority for the proposition that notice periods
should not be extended in difficult economic times or, more controversially, that notice
periods should be reduced when the employer is facing economic difficulties.35
BOX 10.6 » CASE LAW HIGHLIGHT
Should the Employer’s Financial Situation Be Considered in Assessing the Length
of Reasonable Notice?
Michela v. St. Thomas of Villanova Catholic School
2015 ONCA 801
Key Facts: Three teachers at a private school had been employed for between 8 to 13 years pursuant to a series of oneyear fixed contracts. In 2013, the employer informed them that
due to falling enrolments at the school, their contracts would
not be renewed. The employer claimed the employees were
not entitled to notice of termination because they had been
employed on a one-year fixed-term contract that had simply
come to an end. The employees argued that they had really
been employed continuously pursuant to an indefinite-term
contract that included an implied term requiring reasonable
notice of termination. The lower court judge applied the reasoning from the case Ceccol v. Ontario Gymnastics (Box 8.4) and
ruled that the one-year fixed-term contracts were ambiguous
since they also suggested that the relationship would continue
beyond one year, which they did. Considering all of the facts,
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Chapter 10 Termination by an Employer with “Reasonable Notice” 165
the court ruled that the teachers were employed under an
indefinite-term contract and entitled to reasonable notice. The
judge ruled that reasonable notice would be 12 months
applying the normal Bardal factors, but he then reduced the
amount to 6 months on the basis that the employer was in
financial peril due to falling student numbers. He ruled that
the “character of employment” included consideration of the
employer’s circumstances. The employees appealed that
ruling.
Issue: Are the employer’s financial circumstances relevant to
assessing the period of reasonable notice?
Decision: No. The court of appeal discussed the meaning of
“character of employment”:
It suffices to say that the character of the employment, like the other Bardal factors, is concerned with
the circumstances of the wrongfully dismissed employee. It is not concerned with the circumstances
of the employer. An employer’s financial circumstances may well be the reason for terminating a
contract of employment—the event that gives rise
to the employee’s right to reasonable notice. But an
employer’s financial circumstances are not relevant
to the determination of reasonable notice in a particular case: they justify neither a reduction in the
notice period in bad times nor an increase when
times are good. …
Bohemier does not hold, and this court has never
held, that an employer’s financial difficulties justify
a reduction in the notice period. It does no more
than to hold that difficulty in securing replacement
employment should not have the effect of increasing the notice period unreasonably. …
The court of appeal ordered the lower court judge’s original
assessment of 12 months’ notice be reinstated.
Judges do still occasionally extend the notice period by a small amount when an employee is
terminated during a serious economic downturn.36 However, in the 2015 decision described in
Box 10.6, the Ontario Court of Appeal clarified that the employer’s economic circumstances are
not a relevant factor in assessing reasonable notice.37
C. Other Factors Affecting the Length of Reasonable Notice
The courts have said that the list of factors in Bardal is not exhaustive, meaning that judges could
add new factors affecting the length of reasonable notice. One factor that has been added to the
list is inducement. The courts have extended the period of reasonable notice when an employee
had been induced to quit an existing job with promises of secure employment and is then dismissed from the new job. This is what happened in the case of Wallace v. United Grain Growers
Ltd., in which the Supreme Court of Canada stated:
[M]any courts have sought to compensate the reliance and expectation interests of terminated
employees by increasing the period of reasonable notice where the employer has induced the employee to “quit a secure, well-paying job … on the strength of promises of career advancement and
greater responsibility, security and compensation with the new organization.”38
Inducement may justify a longer notice period when the employee’s decision to quit a secure
job is accompanied by expectations of future job security that do not turn out to be accurate and
that can be attributed to words or conduct of the recruiting company.39
inducement: A factor considered in assessing the length of reasonable notice that should be awarded to an employee whose
employment contract is terminated by employer A after employer A encouraged or enticed the employee to quit a prior job with
company B to come to work for employer A.
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166 Part II The Common Law Regime
Some attempts to introduce new factors to the list have ultimately failed. For example, the
Supreme Court of Canada rejected a line of cases in which lower court judges had reduced the
period of reasonable notice when they believed the employee had engaged in misbehaviour that
was not quite serious enough to amount to cause for summary dismissal without notice (“near
cause”).40
IV. Chapter Summary
An employer can terminate an indefinite-term employment contract by giving the employee
notice. The contract itself might indicate how much notice is required and, provided the amount
does not violate applicable employment standards legislation, the expressed contract term
would govern. However, absent a legally compliant notice clause, the courts imply a duty to
provide “reasonable notice.” This chapter explored the origins and application of “reasonable
notice” by common law judges. We learned that the courts are guided by a list of factors set down
in the 1960 case of Bardal v. Globe & Mail Ltd. This approach gives judges considerable discretion and also adds uncertainty to the termination process, since neither employer nor employee
knows for sure how much notice a court could order. However, by reading prior decisions, it is
possible to estimate the range of possible notice by considering the factors in Bardal.
QUESTIONS AND ISSUES FOR DISCUSSION
1. What is the purpose of requiring employers to provide employees with reasonable notice?
2. Does every employment contract in Canada require the employer to provide the employee
with reasonable notice of termination? Explain your answer.
3. What rationale has justified the courts granting longer periods of reasonable notice to
managerial employees over non-managerial employees? Explain why in recent years courts
have begun to question this rationale.
4. Do Canadian courts consider the employer’s financial situation when assessing the period
of reasonable notice?
5. Explain the difference between the Canadian and American approach to the termination
of employment contracts.
APPLYING THE LAW
1. Janice is the human resources manager for ABC Computers Inc., a small computer rental company with 25
employees. The company needs to downsize its workforce and has decided to terminate two non-union
employees: Davidov, a 55-year-old technical worker
with 15 years’ service, and Chloe, a 28-year-old middle
manager with 5 years’ service. Neither employee had
signed an employment contract. Janice has asked you
to help her decide how much notice she is required to
provide each employee.
a. Based on what you have learned in this chapter, try
to estimate what amount of reasonable notice a
court might order for both employees and explain
your thinking.
b. Now go a website called “Severance Pay Calculator”: <https://www.severancepaycalculator.com>.
This website is created by a Toronto law firm and it
uses a software program that estimates how the
courts will apply the Bardal factors. Enter the information for both Davidov and Chloe in the program
when prompted. You can skip the page that asks
about the employee’s salary. What amount of reasonable notice does the severance calculator tell
you that a court would order? Were you close in
your estimate?
c. Finally, turn to Table 20.1 in Chapter 20, which
examines how termination of employment contracts is dealt with under employment standards
legislation. Locate your province and identify how
much notice would be required under the statute
to terminate Davidov and Chloe. How does the
amount of “reasonable notice” compare with the
amount of minimum notice required by employment standards legislation?
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Chapter 10 Termination by an Employer with “Reasonable Notice” 167
EXERCISE
1. To better understand the factors that influence reasonable notice, try the following
exercise:
a. Go to the CanLII home page: <https://www.canlii.org>.
b. In the “Document text” search box, type “reasonable notice.” That search will produce
thousands of cases in which employees have sued their former employers for failing to
provide reasonable notice of termination. Select three of those cases and read them.
c. Prepare a case summary for each case that includes the key facts, the issue, and the decision. In each case summary, be sure to describe the factors the court considered in
assessing the amount of reasonable notice required.
NOTES AND REFERENCES
1. In addition to the cases cited in Box 10.1, see also the following cases, which emphasize employee vulnerability and
the power imbalance that defines employment contracts:
Bowes v. Goss Power Products Ltd., 2012 ONCA 425; Reference Re Public Service Employee Relations Act (Alta.),
[1987] 1 SCR 313; and Braiden v. La-Z-Boy Canada
Limited, 2008 ONCA 464.
2. Lowe v. Walter, [1892] 8 TLR 358. Much of the history
recounted in this chapter is taken from C. Mummé, “That
Indispensable Figment of the Legal Imagination: The Contract of Employment at Common Law in Ontario,
1890s – 1979” (PhD thesis, York University, 2013).
3. Earl of Halsbury, The Laws of England, vol 20 (London:
n.p., 1911) at 96.
4. Bain v. Anderson & Co., [1898] 28 SCR 481.
5. Speakman v. City of Calgary (1908), 9 WLR 264 (Alta. CA).
6. Carter v. Bell & Sons (Canada) Ltd., 1936 CanLII 75 (Ont.
CA). The earlier cases in which “reasonable notice” was
applied include Pollard v. Gibson, 1924 CanLII 398 (Ont.
CA); and Messer v. Barrett Co. Ltd. (1926), 59 OLR 566
(SC (AD)). The Supreme Court of Canada confirmed the
presumption that Canadian employment contracts require
reasonable notice for termination unless otherwise specified in Machtinger v. HOJ Industries Ltd., [1992] 1 SCR
986. See also Prozak v. Bell Telephone Co. of Canada, 1984
CanLII 2065 (Ont. CA).
7. Lazarowicz v. Orenda Engines Ltd., 1960 CanLII 151
(Ont. CA).
8. In her concurring judgment in Machtinger v. HOJ Industries Ltd., supra note 6 at 1012-13, Justice McLachlin of the
Supreme Court of Canada wrote that the reasonable notice
term is implied “in law as a necessary incident” of employment contracts rather than a term implied “in fact.” This
would mean that the intention of the parties is not at issue.
9. See Pelech v. Hyundai Auto Canada Inc., 1991 CanLII 920
(BCCA), quashing an award of four months’ notice for a
shipping employee and substituting a notice period matching the statutory minimum: “If at the outset of his employment, the employer had been asked what notice must you
give if you terminate him, I should think that the answer
would have been ‘whatever the law requires.’ If the employee had been asked what notice must you give if you
want to leave, he would be surprised to have been told he
needed to give more than a week or two.” See also G.
England, Individual Employment Law, 2nd ed (Toronto:
Irwin Law, 2008) at 300-1.
10. England, supra note 9 at 311. See also Medis Health and
Pharmaceutical Services v. Bramble, 1999 CanLII 13124
(NBCA).
11. The Bardal approach was approved by the Supreme Court
of Canada in Machtinger v. HOJ Industries Ltd., supra note
6, and by various provincial courts of appeal: Wiebe v.
Central Transport Refrigeration (Man.) Ltd., 1994 CanLII
6406 (MBCA); Giza v. Sechelt School Bus Service Ltd., 2012
BCCA 18; and Di Tomaso v. Crown Metal Packaging
Canada LP, 2011 ONCA 469.
12. This point is made by Justice McLachlin in Machtinger v.
HOJ Industries Ltd., supra note 6 at 1009.
13. Panimondo v. Shorewood Packaging Corporation, 2009
CanLII 16744 (Ont. Sup Ct J).
14. Minott v. O’Shanter Development Company Ltd., 1999
CanLII 3686 (Ont. CA) at para 62.
15. McKay v. Camco Inc., 1986 CanLII 2544 (Ont. CA) at 267;
and Cronk v. Canadian General Insurance Co., 1995 CanLII
814 (Ont. CA).
16. Erskine v. Viking Helicopter Ltd. (1991), 35 CCEL 322 (Ont.
Gen Div) at 326.
17. K.W. Thornicroft, “The Assessment of Reasonable Notice
by Canadian Appellate Courts from 2000 to 2011” (2013)
17 CLELJ 1 at 29.
18. Ansari v. B.C. Hydro & Power Auth., 1986 CanLII 1023
(BCSC) at 39.
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168 Part II The Common Law Regime
19. Wallace v. United Grain Growers Ltd., [1997] 3 SCR 701;
and Webster v. British Columbia (Hydro and Power Authority), 1992 CanLII 1087 (BCCA) at 109.
20. McKay v. Eaton Yale Ltd., 1996 CanLII 8234
(Ont. Sup Ct J); and Bullen v. Protor & Redfern Ltd.,
1996 CanLII 8135 (Ont. Sup Ct J).
21. Minott v. O’Shanter Development Company Ltd., supra
note 14. See also Kerfoot v. Weyerhaeuser Company
Limited, 2013 BCCA 330; and Capital Pontiac Buick Cadillac GMC Ltd v. Coppola, 2013 SKCA 80.
22. B. Fisher, “Revisiting Reasonable Notice Periods in Wrongful Dismissal Cases: 2006 Edition,” online (pdf): <http://​
barryfisher.ca/papers/Revisiting_Reasonable_Notice.pdf>.
23. McKinney v. University of Guelph, [1990] 3 SCR 229 at para
92; Thornicroft, supra note 17 at 27.
24. Thornicroft, supra note 17 at 20. See also K.W. Thornicroft,
“Severance Pay and the Older Worker: Negotiated Versus
Litigated Outcomes Under Canadian Common Law”
(2015) 52-4 Alb L Rev 779.
25. Bohemier v. Storwal International Inc., 1983 CanLII 1956
(Ont. CA); Cronk v. Canadian General Insurance Co., supra
note 15; and Ansari v. B.C. Hydro & Power Auth., supra
note 18.
26. Cronk v. Canadian General Insurance Co., supra note 15.
27. Cronk v. Canadian General Insurance Co., 1994 CanLII
7296 (Ont. Sup Ct J).
28. Cronk v. Canadian General Insurance Co., supra note 15.
29. Ibid.
30. Minott v. O’Shanter Development Company Ltd., supra
note 14.
31. Oudin v. Le Centre Francophone de Toronto, 2015 ONSC
6494 at para 61.
32. Cases in which non-managerial employees received
greater than 12 months’ notice include the following: Di
Tomaso v. Crown Metal Packaging Canada LP, 2011 ONCA
469 (22 months); Strudwick v. Applied Consumer & Clinical Evaluations Inc., 2016 ONCA 520 (20 months); AMEC
Americas Limited v. MacWilliams, 2012 NBCA 46 (20
months); Systad v. Ray-Mont Logistics Canada Inc., 2011
BCSC 1202 (18 months); Patterson v. IBM Canada
Limited, 2017 ONSC 1264 (18 months); Skov v. G&K Services Canada Inc., 2017 ONSC 6752 (18 months); and
Welch v. Ricoh Canada Inc., 2017 NSSC 174 (16 months).
Thornicroft, supra note 17 at 20-21, notes that between
2000 and 2011, “character of employment” continued to
influence the length of reasonable notice periods. Clerical/
labour employees received from 1.4 to 3.6 months’ less
notice than higher level employees. However, the period of
that study mostly pre-dates the move toward placing less
influence on “character of employment” discussed in the
series of cases mentioned in the chapter.
33. Lim v. Delrina (Canada) Corp., 1995 CanLII 7271 (Ont.
SC) at para 31. Other cases that have considered poor economic conditions as a factor justifying extended notice
periods include Squires v. Corner Brook Pulp & Paper Ltd.
and Manuel, 1994 CanLII 10373 (Nfld. SC); Hunter v.
Northwood Pulp and Timber Ltd., 1985 CanLII 443
(BCCA); Anderson v. Haakon Industries (Canada) Ltd.,
1987 CanLII 2406 (BCCA); Valley Forest Products Ltd. v.
Dey, 1995 CanLII 5582 (NBCA); Sicard v. Timminco Ltd.
(1994), 3 CCEL (2d) 50 (Ont. Gen Div); Garcia v. Crestbrook Forest Industries Ltd., 1993 CanLII 1412 (BCCA);
and Hampton Securities Limited v. Dean, 2018 ONSC 101.
34. Bohemier v. Storwal International Inc., supra note 25.
35. See, e.g., Shuya v. Azon Canada Inc., 1995 CanLII 9084
(Alta. QB); Heinz v. Cana Construction Co., 1987 CanLII
3203 (Alta. QB); Erskine v. Viking Helicopter Ltd., supra
note 16; and Gristey v. Emke Schaab Climatecare Inc., 2014
ONSC 1798.
36. See authorities at supra note 33.
37. Michela v. St. Thomas of Villanova Catholic School, 2015
ONCA 801; and Nielsen v. Sheridan Chevrolet Cadillac
Ltd., 2016 ONSC 1843.
38. Wallace v. United Grain Growers Ltd., supra note 19 at
paras 83, 85.
39. Ibid.; see also Alcatel Canada Inc. v. Egan, 2006 CanLII 108
(Ont. CA); Craig v. Interland Window Mfg. Ltd., 1993
CanLII 1821 (BCSC); Nicholls v. Columbia Taping Tools
Ltd., 2013 BCSC 2201; Wright v. Feliz Enterprises
Ltd., 2003 BCSC 267 (it is not inducement if the employee
and employer were equally interested in forming a new
relationship); Pollock v. Cotter, 2005 BCSC 1799; Greenlees
v. Starline Windows Ltd., 2018 BCSC 1457; and Dias v.
Paragon Gaming EC Company, 2010 ABPC 390.
40. See Dowling v. Halifax (City), [1998] 1 SCR 22. See also
Cicalese v. Saipem Canada Inc., 2018 ABQB 835; and
Porter v. Fleischer, 2011 BCSC 389.
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C H A P T E R 11
Termination by “Frustration”
LEARNING OBJECTIVES
CHAPTER OUTLINE
After reading this chapter, students will be able to:
I. Introduction 169
II. The Implications of a Finding of Frustration of Contract 169
III. The Test for Frustration of Contract 170
IV. Frustration Due to Illness or Disability 171
A. What Medical Evidence Is Relevant in Assessing Permanent
Disability? 171
B. Does Frustration of Contract Apply When a Contract Provides for
Sickness and Disability Benefits? 172
C. Is the Duty to Accommodate a Disabled Worker a Precondition for
Frustration of Contract? 173
V. Chapter Summary 175
Questions and Issues for Discussion 175
Notes and References 176
• Define frustration of contract and identify the circumstances in
which it can arise.
• Describe the implications of a finding of frustration of
contract.
• Explain the test for frustration of contract.
• Explain how an employee illness or disability can bring about
frustration of contract.
• Discuss the key controversies related to applying frustration of
contract to employee illness or disability under an employment
contract.
I. Introduction
Frustration of contract does not fit coherently into any of the other chapters dealing with termination of employment contracts, so it gets its own short chapter. A contract that is frustrated
is terminated neither by agreement of the parties nor as a result of the actions of the employer
or employee. Rather, a frustrated contract comes to an end because something unexpected happens that prevents one or both of the parties from doing what they promised in the contract to
do.1 The classic examples of frustration of the employment contract include circumstances in
which workplaces are destroyed by an “act of God,” such as a fire. Over time, frustration has been
applied to other intervening events that make performance of the contract as originally envisioned impossible, including an employee injury or disability. This chapter examines the evolution of, application of, and controversies relating to frustration of contract in the Canadian
employment setting.
II. The Implications of a Finding of Frustration of Contract
The most important consequence of a finding of frustration of contract is that it instantly
terminates the contract, relieving the parties of any future contractual obligations. It means
most notably that both employer and employee are relieved of their contractual obligation to
frustration of contract: The termination of a contract caused by an unforeseen event that renders performance of the contract
impossible.
169
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170 Part II The Common Law Regime
provide notice of termination.2 In the common law regime, an employee who is dismissed
without receiving the notice required by the contract is entitled to recover monetary damages
calculated based on an assumption that the employee had worked through the notice period.
However, the employer is not required to provide any notice of termination in the following
scenarios:
1. When the employee terminates the contract (Chapter 15).
2. When the contract is a fixed-term or fixed-task contract, as opposed to an indefiniteterm contract (Chapter 8).
3. When the employee commits a fundamental breach of the contract, which the employer treats as cause for dismissal without notice (known as summary dismissal;
Chapter 12).
4. When the contract is frustrated.
Arguments about frustration of contract usually arise in the context of an employer who is
defending a wrongful dismissal lawsuit: the employer announces that the contract is terminated
by frustration and the employee sues for wrongful dismissal, asserting that they are entitled to
receive notice of termination. The court then needs to decide if the conditions for frustration
were satisfied.
Professor Geoffrey England has argued that the “doctrine of frustration is concerned with
who should bear the risk of the unforeseen events.”3 When frustration exists, the burden of the
risk falls on the employee, who will lose out on any contractual entitlements to which they
otherwise would have been entitled to as a consequence of losing their job. On the other hand,
if the unforeseen event does not frustrate the contract, the employer shoulders the financial
implications of the termination of the contract. As we consider the law of frustration in the
remainder of this chapter, think about who bears the risk of the event that intervenes in the performance of the contract.
III. The Test for Frustration of Contract
The modern-day test for contract frustration dates from the 1956 British House of Lords decision Davis Contractors Ltd. v. Fareham Urban District Council.4 The facts of that case are not
important for our purposes, but the court’s statement of the legal test is:
[F]rustration occurs whenever the law recognises that, without default of either party, a contractual
obligation has become incapable of being performed because the circumstances in which performance is called for would render it a thing radically different from that which was undertaken by the
contract. Non haec in foedera veni. It was not this that I promised to do.5
The Supreme Court of Canada later endorsed this test.6 It has been applied to employment
contracts in a number of situations.
The classic application of frustration of contract in the employment setting involves the
destruction of the workplace by an unexpected event, such as a tornado, flood, or fire. That is
what occurred in the early and often-cited British case of Taylor v. Caldwell, in which a music
hall was destroyed by fire, resulting in the cancellation of several musical performances.7 The
death of an employee during the term of a contract also frustrates the contract, since this intervening event obviously prevents further performance.8 A change in the law that would make it
unlawful for the employee to continue to perform their job would also frustrate the contract.
For example, the employment contract of a casino security guard with a prior criminal record
(for breaking and entering) was frustrated when a new statute was enacted prohibiting security
guards from having criminal records.9
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Chapter 11 Termination by “Frustration” 171
Frustration does not occur when the reason the original contract cannot be performed is due
to the voluntary actions of one of the parties. This is known as self-induced frustration. Thus,
an employer’s filing for bankruptcy does not frustrate an employment contract.10 Nor does the
doctrine of frustration apply to terminations or layoffs caused by a business downturn, loss of
customers,11 or a strike by some of an employer’s employees.12 These are normal events that
occur within the ebb and flow of capitalist economies.
IV. Frustration Due to Illness or Disability
Frustration of contract in the work context arises most often due to employee illness or disability. Common law judges long ago decided that absenteeism due to illness or disability
(innocent absenteeism) is not “cause for summary dismissal” because the employee’s behaviour
is not blameworthy.13 Employees unable to work due to illness or disability are still entitled to
notice of termination, and since they cannot work the notice period through no fault of their
own, the employer is obligated to provide pay in lieu of notice unless they can persuade the
court that frustration applies.14 However, these general rules do not apply if the employee’s disability or illness “frustrates” the employment contract.
The courts have found that an employee’s illness or disability can frustrate an employment
contract if the evidence indicates that the medical condition is such that performance in the
future will be impossible or “radically different” from what was contracted for.15 A variety of
factors are relevant in making this assessment, and each case is decided on its own particular
facts. For example, a contract that is for a short duration or that involves a senior employee
without whom the employer cannot function for long will be more easily frustrated than an
indefinite-term contract involving a worker who is more easily replaced.16
In practice, though, most decisions boil down to an assessment of whether the medical evidence indicates that the employee’s disability is permanent rather than temporary, such that it
will forever, or for the foreseeable future, prevent the employee from returning to the job they were
hired to perform.17 It is the responsibility of the party alleging that frustration has occurred (usually the employer) to persuade a court.18 Therefore, even a long absence from work due to illness
will not frustrate an employment contract unless the employer can demonstrate that a return to
work is unlikely in the foreseeable future.19 By contrast, where the evidence indicates that a disability is permanent, a finding of frustration can result, even if the employee had been absent for
only a short period of time prior to the employer announcing the end of the contract.20
Applying the doctrine of frustration to employee illness or disability under an employment
contract has given rise to a number of complex and interesting legal issues and debates. Three
are worth noting briefly in this chapter.
A. What Medical Evidence Is Relevant in Assessing Permanent Disability?
The first controversy relates to the medical evidence that judges should consider in deciding
whether the illness will prevent the employee from performing their job for the foreseeable
future. Medical conditions can change; people sometimes get better, or their condition can deteriorate over time. This point raises the question of the period of time judges should look at
when assessing the employee’s prognosis and potential to return to work. Should judges look
only at the evidence that was available at the time the employer decided to treat the contract as
self-induced frustration: When the actions of the employer or employee make it impossible for the contract as
originally envisioned to be performed. The courts have refused to apply the doctrine of frustration to self-induced frustration.
innocent absenteeism: An employee’s absence from work due to reasons that are not blameworthy, such as illness,
disability, or religious observance.
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172 Part II The Common Law Regime
having been terminated? Or should judges consider “how things actually turned out,” as assessed
at the date of the trial, which could be months or even years after the employment contract was
initially terminated? As described in Box 11.1, judges have not always agreed on the answer.
BOX 11.1 » TALKING WORK LAW
Assessing Whether an Employee’s Disability Is Permanent
An employment contract can be frustrated by a permanent
disability suffered by the employee. This requires employers
and the courts to assess medical evidence about the prognosis
of the employee’s ability to return to work. The courts have
long debated whether that assessment should be based on
medical evidence available at the moment the employer elects
to treat the contract as having been terminated, or at the time
of a trial, which could be months or even years later.
For example, imagine that at the time the employer informs
the employee that the contract is over, the evidence indicates
that the employee will likely be unable to return to work for
the foreseeable future. However, by the time the wrongful
dismissal lawsuit reaches a judge months later, the employee’s
condition has improved dramatically, and the employee could
have returned to work after all. Which medical diagnosis
should govern? Judges have disagreed on the answer.
Approach One: Consider Only Medical Evidence Available
on the Date of Termination
One line of cases rules that only evidence known at the
date of the employer’s decision to terminate the contract
should be considered, since that is the point at which the employer was required to demonstrate frustration existed and
that the employee would be unable to return to work for the
foreseeable future. Examples of this approach include Wilmot
v. Ulnooweg Development Group Inc., 2007 NSCA 49; Altman v.
Steve’s Music, 2011 ONSC 1480; Marshall v. Harland & Wolff
Ltd., [1972] 1 WLR 899 (CA); White v. Woolworth (F.W.) Co., 1996
CanLII 11076 (Nfld. CA); and Ciszkowski v. Canac Kitchens, 2015
ONSC 73.
Approach Two: Consider All Medical Evidence up to the
Date of the Trial
Another line of cases argues that post-termination medical
evidence is relevant. This approach argues that insofar as medical evidence obtained after the termination of the contract
can shed light on the question of whether the employee was
able to return to work, it is relevant and should be considered
by a court in assessing whether the contract was frustrated.
Examples of this approach include Yeager v. R.J. Hastings Agencies Ltd., 1984 CanLII 533 (BCSC) and Demuynck v. Agentis Information Services Inc., 2003 BCSC 96.
Whether one approach or the other benefits the employee or the employer will depend on the facts and circumstances of the case. Can you think of scenarios in which an
employer would prefer the first line of argument and then
other scenarios in which the employer would prefer the
second approach?
B. Does Frustration of Contract Apply When a Contract Provides for Sickness
and Disability Benefits?
Another controversy relates to the relevance of contract terms that entitle an employee to receive
disability benefits if they become ill or disabled. The doctrine of frustration usually applies to
“unforeseen circumstances”21 that were not in the “reasonable contemplation of the parties”
when the contract was formed and that have the effect of rendering performance as originally
anticipated impossible.22 If the contract sets out in detail what happens when the employee
becomes ill or disabled, then the parties clearly have contemplated the possibility that the employee may be felled by illness and unable to work. Consider the case of the factory that burns
to rubble, leaving the factory employees with no work to perform. If their employment contracts
specifically contemplate the possibility that the factory may be destroyed by fire, and also
describes what will happen in that event, then the doctrine of frustration would not apply. Similarly, if an employment contract contemplates that an employee unable to work due to illness
will remain employed throughout the absence while they receive sickness or disability insurance
benefits, then frustration is unlikely to result from the illness.23
However, many employment contracts envision that an employee unable to work due to illness or disability can be terminated even if they are entitled to continue to receive insurance
benefits after the termination. In those cases, courts have ruled that frustration can terminate
the contract, as explained in the decision discussed in Box 11.2.24
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Chapter 11 Termination by “Frustration” 173
BOX 11.2 » CASE LAW HIGHLIGHT
Frustration Caused by Employee Disability When the Contract Provides Long-Term
Disability Benefits
Wightman Estate v. 2774046 Canada Inc.
2006 BCCA 424
Key Facts: The employment contract between Wightman and
2774046 Canada Inc. (the employer) required the employer to
provide “reasonable notice” of termination and provided for
long-term disability benefits until age 65 or Wightman’s death,
whichever came first. Wightman suffered from a series of medical problems and began to receive disability benefits. While
he was receiving disability benefits, he was dismissed without
notice. One year later, at the age of 61, Wightman died. His
estate executor filed a lawsuit for wrongful dismissal on Wightman’s behalf, claiming damages for failure of the employer to
give Wightman reasonable notice of termination. The employer argued that the contract was frustrated by Wightman’s
illnesses.
Issue: Can an employee disability cause frustration of contract
when the contract itself contemplates that an employee may
become permanently disabled?
Decision: Yes. The court found that the proper test for frustration is not whether the parties contemplated the possibility
that a long-term disability might occur—which here they
clearly did—but whether “the parties have provided that their
contractual relationship will continue despite the radical change
in circumstances brought about by the event” (emphasis added).
The court must ask whether the disability is such that it will
be impossible for the employee to perform his duties or the
performance of those duties would be radically different than
what was originally agreed. Frustration of contract will not
result from a short-term illness or disability. However, when
the evidence discloses that the employee will be unable to
perform the job he was hired to do for the foreseeable future,
the contract can become frustrated.
In this case, the contract recognized the possibility that
benefits could continue beyond the date at which the employment contract ends. For example, the benefits plan, which was
part of the contract, referred to the possibility that the employee might “change employers” and provided for payment
of benefits “[i]f … employment ends.” Therefore, the parties
contemplated that the employment contract could come to
an end for some reason even though the employee was disabled at the time of termination. The evidence indicated that
Wightman would not be able to return to any job for the
foreseeable future. Therefore, the contract had become frustrated as a result of Wightman’s illness.
C. Is the Duty to Accommodate a Disabled Worker a Precondition for
Frustration of Contract?
A third controversy that arises from the application of the doctrine of frustration of contract to
ill or disabled employees raises an interesting question about the intersection of the three
regimes of work law (the common law regime, the regulatory standards regime, and the collective bargaining regime) introduced in Chapter 1.
Under Canadian human rights law, an employer cannot dismiss an employee for absenteeism
due to a disability unless it can first demonstrate that it is not possible to accommodate the
employee’s disability without incurring undue hardship.25 (Part III explores human rights legislation.) Volumes of human rights law decisions explore this standard. The Canadian Charter of
Rights and Freedoms (Chapter 38), which governs the actions of government, similarly prohibits
discrimination against workers on the basis of disability and requires accommodation of disabilities to the point of undue hardship.26 As we will learn in Part IV, unionized workers who are
governed by collective agreements are also entitled to accommodation to the point of undue
hardship if they become disabled and unable to perform their normal job.
Most people have at least a vague awareness that Canadian law imposes on employers a
requirement to accommodate employee disabilities, even if they are not aware of the specific
legal source of the requirement. If disability prevents an employee from performing their original job, but the employer could modify the job or move the employee into a different vacant
position that they could perform, the expectation is that the employer will take that step. Human
rights statutes, collective agreements, and the Charter all require at least that much.
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174 Part II The Common Law Regime
However, the common law regime has not yet recognized a parallel requirement for accommodation to be explored as a precondition for a finding of frustration due to disability. The job
contemplated by the original contract is taken as fixed, and judges ask only whether the disability will for the foreseeable future prevent the employee from performing it or require that
the job be performed in a “radically different” manner than originally envisioned. If so, then the
contract is frustrated. The fact that the employee could return to work if the job were modified
in some manner or if offered a different job has been treated as irrelevant in the application of
the doctrine of frustration.27 The employer’s implied prerogative to decide what job an employee
will perform is left untouched by the contract law doctrine of frustration.
The result is that frustration of contract, a contract law doctrine with 19th-century roots, is
today at odds with modern-day expectations and sentiments on the appropriate treatment of
workers with a disability. A common law judge could agree with an employer that an employee’s disability frustrated the contract, even though the employer had ignored its statutory
obligation to accommodate the employee’s disability.28 We noted in Chapter 2 that the three
regimes of work law are not blind to developments in the other regimes. Sometimes legal rules
developed in one regime can penetrate and influence the evolution of laws in the other
regimes. An interesting question is whether the common law regime’s doctrine of frustration
of contract will evolve to recognize a duty to accommodate employee disabilities that parallels
the statutory duty to accommodate. As noted in Box 11.3, there has been movement in this
direction already.
BOX 11.3 » TALKING WORK LAW
Frustration of Contract and the Interaction of Legal Regimes
Chapter 2 introduced a framework for analyzing the law of
work. It noted that work law comprises three distinct regimes:
the common law regime, the regulatory standards regime, and
the collective bargaining regime. Those three regimes have
their own legal rules, actors, and institutions and produce their
own legal outputs. However, we noted too that through an
internal feedback loop, legal rules and norms produced by one
regime can influence developments in other regimes. The
doctrine of frustration of contract offers an example of the
complexity of interactions among regimes.
empted from these requirements when the employment
contract has become “frustrated.”* In a 2005 decision, the
Ontario Court of Appeal ruled that this exemption violated the
Charter of Rights and Freedoms equality rights section (s. 15)
insofar as it punished disabled workers.† As a result, today the
“frustration” exemption in the Ontario ESA does not apply
when the frustration is due to the employee’s illness or injury.‡
Therefore, the Ontario government has incorporated into the
statute a modified version of the common law doctrine of
frustration.
The Influence of the Common Law Regime on the
Regulatory Standards Regime
Frustration of contract is an output of the common law regime,
a legal rule developed in 19th-century Britain, later adopted
by Canadian common law judges and applied to employment
contracts. As noted above, frustration brings a contract to an
end without any need for the parties to give the usual common
law notice of termination and without creating any liability
arising from the termination. The contract just ends. This concept was later incorporated into employment standards statutes (in the regulatory regime).
For example, in Ontario, the Employment Standards Act
(ESA) requires employers to provide employees with notice of
termination and sometimes an additional payment known as
severance pay (see Chapter 20). However, employers are ex-
The Influence of the Regulatory Standards Regime on the
Common Law Regime
Canadian courts have found that an employee’s disability can
frustrate a contract if, for the foreseeable future, that disability
will prevent the employee from performing the job they were
hired to do. In applying the doctrine of frustration to employee
disabilities, common law judges have not usually considered
whether the employee’s disability could have been accommodated in such a way that would enable the employee to
return to work. Within the regulatory standards regime (as we
will learn in Part III), human rights legislation prohibits an
employer from treating the employment contract as frustrated
unless the employer first establishes that there is no way to
accommodate the employee’s disability without incurring undue hardship.
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Chapter 11 Termination by “Frustration” 175
In the 1998 decision Antonacci v. Great Atlantic & Pacific
Co. of Canada, Justice Swinton appeared to modify the common law doctrine of frustration by incorporating the human
rights statute concept of “accommodation.” The employer
argued in that case that the employment contract had been
frustrated by the employee’s disability. Justice Swinton rejected that argument, and in doing so introduced a duty to
accommodate:
Section 5 of the Ontario Human Rights Code prohibits
discrimination on the basis of handicap … [Evidence
indicated that the employee’s] job as a Store Manager could be modified to accommodate a worker
with a back injury. Even if that did not turn out to be
the case, given the extent of the plaintiff’s back
problems, A & P, with 24,000 workers in Ontario,
might well have been able to find alternative suitable
work for him. Given these facts, it could not be said
that the plaintiff’s contract was frustrated.§
It remains to be seen whether this approach requiring
exploration of possible accommodation as a condition for
finding frustration of contract will take hold in Canadian common law. For example, the courts could conclude that before
frustration can be made out, an employer must first exhaust
accommodation efforts, including modifying the employee’s
job or considering whether the employee could be offered a
different job within their capabilities. This approach would
produce a more coherent legal model than exists at present.
It would also be consistent with the Supreme Court of Canada’s
observation that the common law should evolve in a manner
consistent with “Charter values.”#
* See Ontario Regulation 288/01, ss. 2(1)4, 9(1)4.
† Ontario Nurses’ Association v. Mount Sinai Hospital, 2005 CanLII 14437
(Ont. CA).
‡ Ontario Regulation 288/01, ss. 2(3), 9(2)b.
§ Antonacci v. Great Atlantic & Pacific Co. of Canada, 1998 CanLII 14734
(Ont. Sup Ct J) at para 41, aff’d 2000 CanLII 5496 (Ont. CA).
# See RWDSU, Local 558 v. Pepsi-Cola Canada Beverages (West) Ltd., [2002] 1
SCR 156; and Lemesani v. Lowerys Inc., 2017 ONSC 1808 (judge finding a
common law duty to accommodate a disabled worker in the context of
a frustration argument).
V. Chapter Summary
Frustration of contract terminates a contract through no fault of either party, extinguishing any
future contractual obligations the parties owed one another. Frustration usually requires an
intervening event that was not contemplated by the parties that makes it impossible for the
contract to be performed as originally envisioned. The most noteworthy consequence of a finding of frustration is that the employer is relieved of its obligation to give the employee notice of
termination. Since the implications are so serious, the courts have been cautious in applying the
doctrine. However, they have been prepared to find frustration arising from employee illness or
disability, provided that the evidence establishes the employee will be unable to perform the job
they were hired to do for the foreseeable future. Traditionally, common law judges have not
considered whether the employee’s disability can be accommodated as a precondition of a finding of frustration. This approach puts the common law regime in tension with human rights
laws, which prohibit termination of employment contracts for disability-related absences unless
accommodation would incur undue hardship on the employer.
QUESTIONS AND ISSUES FOR DISCUSSION
1. Explain the test for frustration of contract, and provide some examples of how it might
arise in the employment setting.
2. What must an employer prove in order to persuade a court that a contract has been frustrated due to the employee’s illness?
3. Why would an employer want to argue that an employment contract has become
frustrated?
4. What is “self-induced frustration”? Provide examples.
5. Can an employment contract that entitles an employee to receive long-term disability
benefits until the age of 65 be frustrated while the employee is collecting those benefits?
How does the Wightman Estate case described in Box 11.2 affect your answer?
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176 Part II The Common Law Regime
APPLYING THE LAW
1. Bridget suffered a back injury that prevented her from
performing her job with her employer ABC Plumbing
Services. She has already missed eight months of work.
Last week, Bridget’s doctor wrote a letter for the employer that states he does not expect Bridget to be
able to return for the foreseeable future. The employer
decides to terminate Bridget’s employment. The contract says nothing about notice of termination. Must
the employer provide Bridget with reasonable notice
of termination? Explain your answer.
2. Would your answer to question 1 be different if
you learned that the employment contract between
Bridget and ABC Plumbing included a clause that
entitled Bridget to long-term disability benefits if she
becomes ill and that she may not be terminated while
receiving those benefits?
NOTES AND REFERENCES
1. See Chilagan v. Island Lake Band No. 161, 1994 CanLII
4787 (Sask. QB); Wightman Estate v. 2774046 Canada Inc.,
2006 BCCA 424 at 24; and Davis Contractors Ltd. v.
Fareham Urban District Council, [1956] AC 696 at 728. The
Supreme Court of Canada described the doctrine of frustration in Naylor Group Inc. v. Ellis-Don Construction Ltd.,
2001 SCC 58; and Peter Kiewit Sons’ Co. v. Eakins Construction Ltd., [1960] SCR 361. See also J. McCamus, The Law of
Contracts, 2nd ed (Toronto: Irwin Law, 2012) at chapter 14.
2. See the discussion in McLean v. City of Miramichi, 2011
NBCA 80.
3. G. England, Individual Employment Law, 2nd ed (Toronto:
Irwin Law, 2008) at 418. See also, McCamus, supra note 1
at 612-22.
4. Davis Contractors Ltd. v. Fareham Urban District Council,
supra note 1.
5. Ibid. at 728-29.
6. Peter Kiewit Sons’ Co. v. Eakins Construction Ltd., supra
note 1 at 368; and Naylor Group Inc. v. Ellis-Don Construction Ltd., supra note 1.
7. Taylor v. Caldwell, [1893] 122 ER 309 (QB). See also Polyco
Window Manufacturers Ltd. v. Saskatchewan (Director of
Labour Standards), 1994 CanLII 5008 (Sask. QB).
8. McLean v. City of Miramichi, supra note 2 at para 25; Wingfield Estate v. Conroy, [1996] BCJ No. 799 (QL) (SC); and
MacDonald v. School District No. 39, 2004 BCSC 1611.
9. Cowie v. Great Blue Heron Charity Casino, 2011 ONSC
6357. See also Reilly v. The King, 1933 CanLII 379 (UK
JCPC); and Thomas v. Lafleche Union Hospital, 1989 CanLII
5078 (Sask. QB); aff ’d. 1991 CanLII 8039 (Sask. CA)
(a nurse’s contract frustrated after her nursing licence was
revoked).
10. Optenia Inc. (In Bankruptcy) (Re), 2002 CanLII 5308 (Ont.
Sup Ct J).
11. Smith v. Tamblyn (Alberta) Limited, 1979 CanLII 1036
(Alta. QB).
12. St. John v. TNT Canada Inc., 1991 CanLII 420 (BCSC). See
also the discussion in R.S. Echlin and J. Fantini, Quitting for
Good Reason (Toronto: Canada Law Book, 2001) at 118-19.
13. See Yeager v. R.J. Hastings Agencies Ltd., 1984 CanLII 533
(BCSC), at paras 71-72.
14. Sylvester v. British Columbia, [1997] 2 SCR 315 at paras 9,
15; and McRae v. Dodge City Auto (1984) Ltd., 1994 CanLII
4955 (Sask. QB). See also the discussion in England, supra
note 3 at 420-21.
15. Dartmouth Ferry Commission v. Marks 34 SCR 366; Wightman Estate v. 2774046 Canada Inc., supra note 1; Marshall
v. Harland & Wolff Ltd., [1972] 1 WLR 899 (CA); Yeager v.
R.J. Hastings Agencies Ltd., supra note 13; Skopitz v. Intercorp Excelle Foods Inc., 1999 CanLII 14852 (Ont. Sup Ct J);
Ryhorski v. Commercial Industrial Manufacturing Ltd., 2019
SKQB 85; Fraser v. UBS, 2011 ONSC 5448; Lemesani v.
Lowerys Inc., 2017 ONSC 1808; Roskaft v. RONA Inc., 2018
ONSC 2934; and Duong v. Linamar Corporation, 2010
ONSC 3159.
16. The leading case that describes the factors courts should
consider in assessing whether an employment contract has
been frustrated is Marshall v. Harland & Wolff Ltd., supra
note 15 at 718-19. See also Dragone v. Riva Plumbing
Limited, 2007 CanLII 40543 (Ont. Sup Ct J) at para 21.
17. This distinction between temporary and permanent disability has deep roots and was noted in Dartmouth Ferry
Commission v. Marks, supra note 15.
18. Dragone v. Riva Plumbing Limited, supra note 16.
19. For example, in Yeager v. R.J. Hastings Agencies Ltd., supra
note 13, the employee had been absent for two years due to
illness, but the contract was not frustrated since the evidence did not establish that illness would persist for the
foreseeable future. Other cases in which courts found no
frustration due to lack of evidence that the employee
would be unable to return to work include Lippa v.
Can-Cell Industries Inc., 2009 ABQB 684; Antonacci v.
Great Atlantic & Pacific Co. of Canada, 1998 CanLII 14734
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Chapter 11 Termination by “Frustration” 177
(Ont. Sup Ct J), varied on other grounds 2000 CanLII 5496
(Ont. CA); Dragone v. Riva Plumbing Limited, supra note
16; Naccarato v. Costco, 2010 ONSC 2651; Altman v. Steve’s
Music, 2011 ONSC 1480; White v. Woolworth (F. W.)
Canada, 1996 CanLII 11076 (Nfld. CA); and Bishop v.
Carleton Cooperative Ltd. (1996), 21 CCEL (2d) 1 (NBCA).
20. In McRae v. Dodge City Auto (1984) Ltd., supra note 14,
frustration of contract was found when an employee had
been absent for less than three months due to illness, but
the court was persuaded that the disability was permanent.
21. G.H.L. Fridman, The Law of Contract in Canada, 4th ed
(Scarborough, ON: Carswell, 1999) at 677.
22. Davis Contractors Ltd. v. Fareham Urban District Council,
supra note 1; St. John v. TNT Canada Inc., supra note 12;
O’Connell v. Harkema Express Lines Ltd., 1982 CanLII 3198
(Ont. Sup Ct J); and Polyco Window Manufacturers Ltd. v.
Saskatchewan (Director of Labour Standards), supra note 7.
23. See England, supra note 3 at 421: “If an employee absent
because of sickness is entitled to and is in receipt of longterm disability benefits under an employment contract, the
contract almost certainly cannot be regarded as frustrated,
since the parties will have foreseen the alleged frustrating
event and have expressly contracted for it.” See also
Antonacci v. Great Atlantic & Pacific Co. of Canada, which
varied on other grounds, supra note 19.
24. See also: Duong v. Linamar Corporation, supra note 15; and
Fraser v. UBS, supra note 15.
25. Hydro-Québec v. Syndicat des employé-e-s de techniques professionnelles et de bureau d’Hydro-Québec, section locale
2000 (SCFP-FTQ), 2008 SCC 43. An example of a typical
statutory requirement to accommodate employee disability
is found in s. 17 of the Human Rights Code, RSO 1990,
c. H.19.
26. Canadian Charter of Rights and Freedoms, Part I of the Contitution Act, 1982, being Schedule B to the Canada Act 1982
(UK), 1982, c. 11, s. 15(1). See Eldridge v. British Columbia
(Attorney General), [1997] 3 SCR 624; Ontario Nurses’ Association v. Mount Sinai Hospital, 2005 CanLII 14437 (Ont.
CA) (the section of the Ontario Employment Standards Act
that excludes from severance pay employees whose contract
has become frustrated violated Section 15 of the Charter).
27. See Wightman Estate v. 2774046 Canada Inc., supra note 1
at paras 55-56.
28. A human rights tribunal may accept that a contract was
frustrated by an employee disability and was therefore not a
violation of the statutory duty to accommodate, but it must
first assess whether accommodation would have been possible. See Barboutis v. Singer Valve, 2012 BCHRT 244; Senyk
v. WFG Agency Network (No. 2), 2008 BCHRT 376; and
Gahagan v. James Campbell Inc., 2014 HRTO 14.
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C H A P T E R 12
Summary Dismissal: Termination
for Cause Without Notice
LEARNING OBJECTIVES
CHAPTER OUTLINE
After reading this chapter, students will be able to:
I. Introduction 179
II. The Basic Legal Principles Applied to Summary Dismissal Cases 180
A. The Proportionality Test: McKinley v. BC Tel 180
B. Can the Employer Rely on Evidence of Employee Misconduct Learned After the
Decision to Terminate the Employee? 182
C. Single Wrongful Acts Versus “Cumulative Just Cause” 183
D. Employer Condonation of Employee Misconduct 185
E. Specific Penalty Clauses in Contracts 185
III. Common Grounds for Summary Dismissal 185
A. Dishonesty and Conflict of Interest 186
B. Gross Incompetence and Safety Violations 186
C. Breach of Faithful Service to the Employer 186
D. Insubordination and Insolence 188
E. Harassment 188
F. Violence and Threats of Violence 190
G. Absenteeism and Lateness 190
H. Off-Duty Conduct 191
I. Inappropriate Use of Employer Technology 192
J. Intoxication at Work 193
IV. Chapter Summary 193
Questions and Issues for Discussion 194
Exercise 195
Notes and References 195
• Define summary dismissal in the context of
the common law of the employment
contract.
• Identify the factors that an employer must establish to
prove grounds for summary dismissal.
• Describe the principle of proportionality applied by
the courts to determine whether cause for summary
dismissal exists.
• Describe the difference between cause based on a
single isolated incident of wrongdoing and cumulative
just cause.
• Explain how the law of summary dismissal is applied
to the most common forms of employee misconduct.
• Research and understand case law dealing with
summary dismissal arguments.
I. Introduction
Imagine that Mitchell, an employee, steals thousands of dollars from his employer. The employer
dismisses Mitchell and calls the police to have criminal charges laid. However, a term in Mitchell’s employment contract entitled him to notice of termination and says nothing about whether
that requirement is waived if he steals money. Should Mitchell still be entitled to notice? Or has
he forfeited that entitlement by stealing from his employer?
We learn in this chapter that employers can terminate an employee’s employment contract
without notice when the employee commits a serious, or fundamental, breach of contract. This
type of termination of an employment contract is known as summary dismissal for cause. The
summary dismissal: Termination of an employment contract by an employer without notice to the employee in response to
a serious breach of contract by the employee.
179
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180 Part II The Common Law Regime
Ontario Court of Appeal explained summary dismissal in the 1967 case of R v. Arthurs,
Ex p. Port Arthur Shipbuilding Co.:
If an employee has been guilty of serious misconduct, habitual neglect of duty, incompetence, or
conduct incompatible with his duties, or prejudicial to the employer’s business, or if he has been
guilty of wilful disobedience to the employer’s orders in a matter of substance, the law recognizes the
employer’s right summarily to dismiss the delinquent employee.1
Since summary dismissal requires a fundamental breach of a term of the employment contract, the implied contract terms we learned about in Chapter 9 play a starring role in the law
of summary dismissal. You might want to do a quick refresher of what those terms were, because
employers often rely on them as the basis for their decision to summarily dismiss an employee.
Of course, breach by an employee of an expressed (written) contract term can also give rise to
summary dismissal.
The issue of whether an employer had cause for summary dismissal usually arises in a
wrongful dismissal suit filed by the employee. The employer will defend the employee’s claim
of damages for failure to give notice of termination by arguing that it had cause and therefore
was not required to give notice. It falls to judges to determine whether cause exists. Over the
years, the courts have decided hundreds of these cases; entire books have been written summarizing the decisions.2 The objective of this chapter is to explain a basic framework that will
allow you to assess whether an employee’s misconduct is likely to result in cause for summary
dismissal.
II. The Basic Legal Principles Applied to Summary
Dismissal Cases
Summary dismissal extinguishes the employee’s entitlement to notice of termination and
hence has been described as the “capital punishment” of employment law.3 Recall from
Chapter 11 that a policy rationale for requiring employers to provide notice of termination is
to ensure employees have time to plan for the loss of their job. An employee dismissed for
cause loses that important benefit. In addition, being terminated for cause can tarnish the
employee’s reputation and make finding new employment more difficult. It can also disqualify
the employee from receiving unemployment insurance benefits (see the online chapter, “Regulating Unemployment”).
Because of the harsh ramifications for employees, and in contrast to the approach of judges
in the 19th and early 20th centuries, modern courts have developed a relatively high threshold
for finding summary dismissal.4 Judicial recognition that employees are often in a vulnerable
position (as discussed in Chapter 10) has coloured the approach to summary dismissal, as we
will see. If the employer fails to persuade the court that it has cause for summary dismissal, the
court will rule that a wrongful dismissal has occurred and order the employer to pay damages
according to the rules we will consider in Chapter 14. Let’s now consider the basic elements of
the law of summary dismissal.
A. The Proportionality Test: McKinley v. BC Tel
The leading case setting out the modern approach to summary dismissal is described in
Box 12.1. The case involved alleged employee dishonesty, but the test applied by the Supreme
Court of Canada is now applied to all forms of employee misconduct.
implied contract term: A default contract term invented by common law judges and read into an employment contract when
the written terms of the contract (if any) do not address the specific issue addressed by the implied term.
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Chapter 12 Summary Dismissal: Termination for Cause Without Notice 181
BOX 12.1 » CASE LAW HIGHLIGHT
When Is Dishonesty Grounds for Summary Dismissal?
McKinley v. BC Tel
2001 SCC 38
Key Facts: McKinley suffered from high blood pressure, and
his doctor instructed him to take a leave from work. The doctor
subsequently told him he could return to work if he took a
drug known as a “beta blocker.” McKinley did not disclose this
option to his employer, BC Tel, and instead asked his employer
to accommodate him in a less stressful job. The employer
declined to offer an alternative job and instead terminated
McKinley’s employment contract without notice. McKinley
sued for wrongful dismissal. At trial, the employer argued that
it had cause to dismiss McKinley because he had not disclosed
the doctor’s advice to return to his old job while taking the
beta blocker.
Issue: Did McKinley’s failure to disclose the option of returning
to work using the beta blocker drug amount to dishonesty
sufficient to justify summary dismissal without notice?
Decision: No. This dishonesty was not sufficiently serious to
constitute cause for summary dismissal. The Supreme Court
of Canada rejected a line of earlier cases* in which the courts
found that any dishonesty by an employee, no matter how
trivial, was cause for summary dismissal. It noted that employees derive a “sense of identity and self-worth [as] individuals … from their employment” and are “in a vulnerable
position vis-à-vis their employers.” This fact should influence
how judges approach summary dismissal. An employee’s conduct should be assessed in a broader context, according to
the decision:
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.
The Supreme Court noted that it was applying a “principle
of proportionality” that requires the courts to strike a balance
“between the severity of an employee’s misconduct and the
sanction imposed.” Here, while McKinley was not completely
straightforward with the employer, his actions did not rise to
the level of dishonesty inconsistent with the employment
relationship. McKinley was awarded wrongful dismissal damages based on a long period of 26 months’ reasonable
notice.
* Authority for the position that any employee dishonesty amounts to
cause for summary dismissal, rejected by the Supreme Court in the
McKinley decision, includes Boston Deep Sea Fishing Co. v. Ansell, [1888]
39 Ch. D 339 (CA); and McPhillips v. British Columbia Ferry Corporation,
1994 CanLII 6416 (BCCA).
The contextual or “proportional” approach applied by the Supreme Court in McKinley
requires the courts to apply a two-step test. The key legal principles applied in summary dismissal cases are summarized in Box 12.2. First, the courts decide whether the evidence establishes that the employee engaged in misconduct of some sort in breach of an implied or
expressed term of the contract. In this task, the courts apply the standard of a balance of probabilities, which means essentially that the evidence confirms it is more likely than not that the
employee committed the wrongful act.5
Second, if the court finds that the employee breached the contract, then it assesses the seriousness of the misconduct to determine whether summary dismissal was warranted. In McKinley, the Supreme Court described this part of the test as an assessment of whether the employee’s
actions “gave rise to a breakdown in the employment relationship.” In other cases, judges have
asked whether the employee’s actions were “such a violation of trust that a continuing relationship [is] impossible.”6 Still other judges have said that the test is whether the employee’s actions
amount to a repudiation of the contract as a whole or of an “essential term” of the contract.7
balance of probabilities: An evidentiary standard of proof requiring evidence that it is more likely than not that an incident
occurred.
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182 Part II The Common Law Regime
BOX 12.2 » TALKING WORK LAW
Summary of the Law of Dismissal for Cause (Summary Dismissal)
The courts apply a principle of proportionality to determine
cause for summary dismissal: “in all the circumstances” is dismissal without notice an appropriate sanction given the nature
of the employee’s breach of contract?* This approach involves
a two-step test:
Step One
Did the employer establish on a “balance of probabilities” that
the employee breached the contract?
The employer can rely on evidence of employee misconduct
learned after the employee was dismissed to answer this
question.
Step Two
Is the employee’s misconduct sufficiently serious that it undermines the foundation of the employment contract?
This second question is sufficiently malleable that it affords
judges considerable discretion. In general terms, only serious
employee misconduct that causes employers economic or
reputational harm will be found to meet the standard for
summary dismissal. The courts consider all of the circumstances that surround the employee’s misconduct (mitigating
circumstances or factors), including elements such as the
employee’s length of service and past record, premeditation,
provocation, the employee’s personal circumstances, and
any other circumstances that might explain the employee’s
behaviour.
If the court answers the questions in steps one and two in
the affirmative, then the employer is relieved of the obligation
to provide notice of termination to the employee. However, if
the answer at either step one or step two is negative, then the
employer will fail in its attempt to prove cause for summary
dismissal. In that event, the court will assess how much notice
of termination should have been given to the employee and
calculate damages owing to the employee based on that assessment. The calculation of damages for wrongful dismissal
is considered in Chapter 14.
* See McKinley v. BC Tel, 2001 SCC 38.
In practice, not much turns on how the test is described.8 Essentially, the courts ask whether
the employee’s misconduct was so serious that the employment relationship has been irreparably undermined. In assessing this question, the courts look at all of the circumstances, including
the seriousness of the misconduct and the harm to the employer’s business interests, as well as
other mitigating factors, such as the employee’s past employment record and length of service,
whether there was provocation, whether the employee was experiencing personal or physical
difficulties at the time, whether the wrongful act was premeditated and planned or just a poor
spur of the moment decision, and whether the employer had ignored the misconduct in question in the past.
B. Can the Employer Rely on Evidence of Employee Misconduct Learned
After the Decision to Terminate the Employee?
Imagine that our employee, Mitchell, is dismissed without notice, and he files a wrongful dismissal lawsuit. The employer originally alleged poor performance as the cause. However, prior
to the trial, the employer discovers that Mitchell had stolen money from the employer in the
weeks before his dismissal. Mitchell’s poor performance would not alone have been serious
enough to justify summary dismissal without notice, but the theft sure would be. At the trial,
principle of proportionality: The test applied by the courts in summary dismissal cases that assesses whether the termination of an employee’s contract without notice is an appropriate response to the employee’s misconduct, considering all of the
relevant facts.
mitigating circumstances/factors: Personal or workplace-related factors that, while not directly the cause of an employee’s
behaviour, help explain or justify an employee’s behaviour.
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Chapter 12 Summary Dismissal: Termination for Cause Without Notice 183
can the employer change the reason for the termination from poor performance to theft, even
though theft was not the reason Mitchell was initially fired?
The courts have said that the employer can do just that.9 The logic is that an employee’s fundamental breach of contract grants an employer the right to refuse to comply with its obligation
to give notice, so it matters not that the employer only learns of that breach later on. Also, from
a policy perspective, if an employee could avoid summary dismissal by concealing their misconduct, then the law would reward employees for their dishonesty. The Ontario Court of Appeal
described this rule way back in 1889:
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 act or rely upon it, or even did not 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.10
The fact that the employer can rely on new facts learned after the decision to dismiss the employee creates an incentive for employers to keep investigating the employee right up to the date
of the trial.
C. Single Wrongful Acts Versus “Cumulative Just Cause”
A single breach of contract by an employee can meet the test for summary dismissal, but the
incident must be very serious or a wilful breach of contract. For example, an outright refusal
by the employee to perform their job may be treated as a fundamental breach of the contract
that the employer may treat as having brought the contract to an end with no obligation on the
employer to provide notice of termination.11 A single wrongful act that strikes at the foundation
of the relationship of trust between employer and employee (e.g., theft, fraud, violations of privacy or confidentiality, secretly competing against the employer) may also constitute cause for
summary dismissal, as can single serious acts of violence, harassment, or violations of safety
rules that put employees or others at risk, as demonstrated in the case described later in
Box 12.4.12
While a single serious incident can lead to summary dismissal, often employers rely on an
accumulation of less serious employee misconduct (rather than a single wrongful act), which is
known as cumulative just cause.13 A breach of contract that alone would not be cause for summary dismissal can serve as the proverbial straw that breaks the camel’s back if the employee has
committed prior breaches of contract. That final breach of contract—the proverbial straw—is
known as the culminating incident.14
The courts have applied the cumulative just cause doctrine cautiously. For an employer to win
an argument based on cumulative cause, it must persuade the court that
1.
2.
3.
4.
the employee was given clear and express warnings about their performance;
the employee was given a reasonable opportunity to improve after the warnings;
the employee failed to improve notwithstanding being given a fair chance; and
the cumulative failings of the employee prejudiced the employer’s business.15
wilful breach of contract: A deliberate, defiant, or premeditated violation of the requirement(s) of a contract.
cumulative just cause: Grounds for summary dismissal based on an accumulation of wrongful acts by an employee over a
period of time.
culminating incident: The final breach of contract by an employee following progressive discipline that the employer relies
on to justify termination of an employee for cause.
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184 Part II The Common Law Regime
This test imposes on employers a duty to warn an employee if the employer intends to rely
on cumulative just cause and to provide the employee with a period of time to alter their behaviour.16 The duty to warn incorporates a “corrective theory” of discipline based on the notion that
employers should attempt to correct performance problems by progressive discipline before
jumping to the ultimate sanction of termination without notice.17 For this reason, the presence
and consistent application of a progressive discipline policy will improve the likelihood of summary dismissal based on cumulative cause being upheld by a court.18 Box 12.3 examines the
origins of the duty to warn in the common law model.
BOX 12.3 » TALKING WORK LAW
Internal Feedback Loop: How Collective Bargaining Law Influences the Common Law Regime:
Progressive Discipline
In Chapter 2 we noted that while the three regimes of work
law are distinct legal systems, they also occasionally influence
one another through an internal feedback loop. Legal principles developed in one regime can be adopted in whole or in
part in another regime. An example of this influence can be
seen in the application of progressive discipline in the common law regime.
We will learn in Part IV that discipline and termination
disputes in unionized workplaces are heard by labour arbitrators and not courts. Almost every collective agreement (the
employment contract for unionized workers) includes a term
providing that the employer can only discipline or dismiss an
employee if there is “just cause.” Over the years, in interpreting
“just cause” provisions, labour arbitrators have developed a
doctrine of “progressive discipline,” which requires employers
to apply lesser forms of discipline (warnings, suspensions)
before terminating an employee’s employment contract. This
arbitral case law forms an important output of the collective
bargaining regime.
Hardly any non-union employment contracts include “just
cause” requirements. Therefore, labour arbitration law has no
obvious or direct relevance to the common law of the nonunion employment contract. In fact, in the case of McGavin
Toastmaster Ltd. v. Ainscough, the Supreme Court of Canada
explained that the common law and the collective bargaining
regimes are distinct, and the rules of termination in one have
no application to the rules in the other.*
Nevertheless, in recent years common law judges have
gazed into the collective bargaining regime to see how labour
arbitrators have applied progressive discipline. Some judges
have liked what they have seen. How did this occur?
In the 2004 case of Cabiakman v. Industrial Alliance Life Insurance Co., the Supreme Court considered whether an employer governed by Quebec civil law could suspend an
employee without pay. In that context, the Supreme Court
stated, “There are factors that have been developed in the
decisions of labour arbitrators that can guide the courts in
determining whether an employer was justified in deciding to
temporarily suspend an employee against whom criminal
charges had been laid.Ӡ
The next year, an Alberta judge (who was formerly a labour
lawyer who litigated collective agreement disputes before
labour arbitrators) referenced that passage in a decision on
whether an employee was unjustly dismissed for summary
dismissal. In Henson v. Champion Feed Services Ltd., Justice
Sheila Greckol wrote the following:
The Supreme Court of Canada has recently affirmed
that it is appropriate for courts to look to the
decisions of labour arbitrators for guidance on
the application of principles within their familiar
terrain.‡
Justice Greckol then examined the “theoretical basis for
the progressive discipline approach” in labour arbitration
duty to warn: A requirement in both the common law and collective bargaining law regimes for employers to warn
employees that their behaviour or performance is unacceptable and to give them a reasonable opportunity to correct their
performance.
progressive discipline: The application in stages by employers of progressively more serious discipline to correct performance
problems.
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Chapter 12 Summary Dismissal: Termination for Cause Without Notice 185
jurisprudence, citing labour arbitration decisions. Arbitrators
have recognized that progressive discipline is a “fair” system
that provides an employee with a warning and a chance to
improve before being dismissed. Justice Greckol ruled that an
employer relying on a cumulative breach to justify summary
dismissal must demonstrate that it first applied progressive
discipline. See also the earlier decision in Riehl v. Westfair Foods
Ltd., where the court noted that the “corrective theory” developed initially by labour arbitrators has been adopted by the
courts in assessing whether employers have cause for summary
dismissal.§
* McGavin Toastmaster Ltd. v. Ainscough, [1976] 1 SCR 718.
† Cabiakman v. Industrial Alliance Life Insurance Co., [2004] 3 SCR 195 at
para 64.
‡ Henson v. Champion Feed Services Ltd., 2005 ABQB 215 at para 53.
§ Riehl v. Westfair Foods Ltd., 1995 CanLII 6086 (Sask. QB). See also Barton v.
Rona Ontario Inc., 2012 ONSC 3809.
D. Employer Condonation of Employee Misconduct
An employer that learns of an employee’s misconduct but then allows an extended period of
time to pass without sanctioning the employee may be prohibited from relying on that misconduct as the basis for summary dismissal. The courts call this condonation of the employee’s
breach of contract. There is no precise amount of time that can pass between the wrongful
behaviour by the employee and the termination before a court will rule that the employer condoned the employee’s actions. The court will consider all of the circumstances and decide
whether the employer acted within a reasonable period of time.19 Misconduct that is condoned
by the employer can still be considered if the employer later terminates the employee based on
cumulative cause, provided that the employee engages in new misconduct—a new culminating
incident—after the initial wrongful act.20
E. Specific Penalty Clauses in Contracts
The discussion in this chapter so far assumes that the contract itself does not expressly define
what constitutes cause for dismissal without notice. It is possible for a contract to include a
specific penalty clause that determines what sorts of employee misconduct will constitute cause
for dismissal without notice.21 For example, a contract might state that any theft, regardless of
the amount, is cause for immediate termination without notice. Provided the contract language
is clear and unambiguous, the effect of a specific penalty clause would be to oust the common
law rules pertaining to cause for summary dismissal that we are discussing in this chapter.22 Few
reported decisions involve the application of specific penalty clauses; relatively few employment
contracts include them, and it may be that few employees challenge their employer’s application
of those clauses.
III. Common Grounds for Summary Dismissal
The preceding section provided an overview of the basic legal principles that are important in
summary dismissal cases. Whenever an employer argues as its defence in a wrongful dismissal
lawsuit that it had grounds for summary dismissal, the courts apply the proportionality test used
in the McKinley decision, described above. Now let’s consider specific types of employee behaviour that can cause an employer to terminate the contract for cause.
condonation: When a party that could have treated the employment contract as having been repudiated (terminated) by the
other party’s breach of the contract elects not to treat the contract as being repudiated.
specific penalty clause: A term in a contract that defines the penalty that will result as a consequence of a specified breach
of contract by one of the parties.
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186 Part II The Common Law Regime
A. Dishonesty and Conflict of Interest
We have already considered dishonesty as a ground for summary dismissal in the McKinley decision (Box 12.1). We learned that while dishonesty is considered to be a serious wrong, not
every dishonest act gives the employer grounds for summary dismissal. The courts assess the
context and seriousness of the dishonesty in deciding whether it has irreparably undermined
the trust necessary in an employment relationship.23 In applying this standard, the role of the
employee in the business is relevant. Employees who work with significant autonomy and who
are in positions of authority or positions requiring special trust (such as bank employees) are
often held to a higher standard of ethical behaviour than are employees who are not in such
positions.24
Theft and fraud are particularly serious forms of dishonesty, and if a court finds that an employee committed premeditated theft or deliberately schemed to defraud the employer or a
customer, summary dismissal is the likely outcome.25 However, the employer must establish that
the theft or dishonesty was intentional and not the result of innocent oversight or a mistaken
belief that the behaviour in question was permissible.26 Other forms of intentional employee
dishonesty can also give rise to summary dismissal as a breach of the implied obligation of fidelity and honesty (see Chapter 9), such as time theft and lying to the employer (including during
the recruitment process, as we noted in Chapter 6).27 However, whether such actions will lead
to summary dismissal depends on the degree of dishonesty involved, as well as other mitigating
circumstances.
B. Gross Incompetence and Safety Violations
A duty to perform one’s job competently and safely is an implied term of every employment
contract, as we learned in Chapter 9, and in some cases it is also required by an expressed contract term. However, simply being a substandard employee is not grounds for summary dismissal. The courts have used the phrase gross incompetence to describe the standard necessary
to justify summary dismissal.28 A single act of incompetence can meet this standard if it is particularly egregious or constitutes a serious violation of safe work practice that is known to the
employee, as demonstrated in the decision in Box 12.4.29
Often employers that assert cause of dismissal based on incompetent performance rely on
cumulative just cause, discussed earlier. The “duty to warn,” mentioned above, is crucial in these
cases, as the decision discussed in Box 12.5 demonstrates.30
C. Breach of Faithful Service to the Employer
Another implied contract term considered in Chapter 9 requires employees to act in furtherance
of the employer’s economic interests. This term includes a duty of faithful service to the employer and a prohibition on competing with the employer. Breaches of these duties can give rise
to summary dismissal. For example, the courts have found cause for summary dismissal where
employees secretly engaged in competition with their employer or took secret profits from the
employer by not reporting income.31 The obligation of faithful service is a flexible concept,
granting judges considerable latitude to decide what sorts of employee conduct it governs. In
the Middelkoop v. Canada Safeway Limited case, the summary dismissal of a retail store manager
who violated a company policy prohibiting employees from purchasing marked-down products
was upheld. The employee claimed he was not aware of the policy. The Manitoba Court of
time theft: When an employee falsely claims wages for time not actually worked.
gross incompetence: A level of employee performance that falls far below that expected of a reasonably competent
employee.
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Chapter 12 Summary Dismissal: Termination for Cause Without Notice 187
Appeal ruled that the employee’s failure to learn the policies—and his “tuning out” of a subordinate who warned him his actions were in breach of the policy—violated the “obligation of
faithful service,” which was an essential condition of all employment contracts.32
BOX 12.4 » CASE LAW HIGHLIGHT
Violation of Safety Rules Gives Employer Grounds for Summary Dismissal
Balzer v. Federated Co-operatives Limited
2018 SKCA 93
himself, others, and the environment. Balzer sued for wrongful dismissal.
Key Facts: Balzer was terminated for cause without notice
after six years’ employment for serious violations of the
employer’s safety rules. Balzer had no prior discipline. Balzer
had received extensive safety training as a propane coordinator and knew violating the safety rules could lead to termination. One morning, while filling his truck with propane,
Balzer violated several safety rules and as a result propane
escaped into the air for nearly 30 minutes discharging an
estimated 5,000 litres of propane into the environment. During the leak, Balzer left the property to find a wrench, leaving
the gate unsecured. He did not report the leak to police, fire
services, or management until a long period had passed.
When the leak stopped, Balzer left for an hour lunch without
reporting the problem to management, even though there
continued to be a risk that the leak could resume. The
employer terminated Balzer for cause on the basis that Balzer had violated five safety rules causing a serious risk to
Issue: Did the employer have cause for summary dismissal
based on the violation of several safety rules during the propane leak incident?
Decision: Yes. The court cited the McKinley decision for the
point that the penalty must be proportional to the employee’s
wrongful acts. Balzer’s actions violated known safety protocols
and the resulting discharge of propane created an emergency
situation that Balzer did not take sufficiently seriously, as confirmed by his casual response, including taking a one-hour
lunch during the ordeal and not reporting the leak to authorities as require by safety protocols. The court did not find any
mitigating circumstances that would explain or justify Balzer’s
breach of several important safety rules. Even though the
cause of the termination related to a single incident in an
otherwise good six-year work record, the court found that
Balzer’s actions were sufficiently serious to justify a finding of
cause for summary dismissal.
BOX 12.5 » CASE LAW HIGHLIGHT
Incompetence as Cause for Summary Dismissal
Babcock v. C. & R. Weickert Enterprises Ltd.
1993 CanLII 3112 (NSCA)
Key Facts: Babcock was hired as manager of a Canadian Tire
store in April 1990. The store did well under his management.
However, in October 1990 the owner of the store received a
report from an external consultant indicating that other senior
employees had “lost confidence” in Babcock. The employer
confronted Babcock with this allegation and emphasized the
need for Babcock to address the problems. The employer told
Babcock that his performance would be reviewed in the new
year. Babcock took a vacation in early January 1991. At a manager’s meeting held in Babcock’s absence, it was agreed that
Babcock was not performing his job adequately and that he
would be given a 45-day period to improve. However, when
he returned several weeks later, Babcock was dismissed.
Issue: Did the employer have cause to summarily dismiss
Babcock for incompetence?
Decision: No. The court of appeal found that, in order to
establish cause for summary dismissal, the onus was on the
employer to demonstrate that (1) Babcock was duly warned
that his performance must improve or his services would be
terminated; (2) Babcock understood the warning; and (3)
Babcock was given a reasonable opportunity to rectify his
performance deficiencies. While both (1) and (2) were satisfied, the employer failed to demonstrate that Babcock had
been given a reasonable time to improve. Only about two
months passed between the time Babcock was warned and
his dismissal, and that included the busy Christmas rush
period during which Babcock would not have been able to
take additional training. Moreover, the fact that the employer had initially decided to give Babcock a 45-day period
to improve supported the conclusion that Babcock was not
given a reasonable time to improve. Babcock was awarded damages based on a period of five months’ reasonable
notice.
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188 Part II The Common Law Regime
D. Insubordination and Insolence
It is an implied (if not expressed) term of every employment contract that the employee will
obey lawful employer directions. A breach of this term is known as insubordination.33 As noted
above, a court is likely to find that an employee’s absolute refusal to perform the core functions
of the job amounts to a repudiation of the contract that demonstrates an intention by the employee to treat the contract as at an end. In that case, an employer can simply treat the contract
as over and provide no notice to the employee.
However, short of an absolute refusal to perform the core functions of their job, not every act
of employee insubordination will be grounds for summary dismissal. That is the lesson that
flows from the McKinley proportionality test discussed earlier. For insubordination to amount
to cause for summary dismissal, it must involve a serious issue, be wilful, and demonstrate a
defiant refusal to respect a clear and unambiguous order that was within the authority of the
employer to make.34 But even an act of wilful disobedience by an employee will not be grounds
for summary dismissal if it involves a relatively minor transgression or the employee had a “reasonable excuse” for not complying, such as a concern that the order was unlawful or that complying with it could expose the employee to harm.35 A less serious incident of insubordination
that would not alone constitute cause for dismissal may nevertheless serve as the culminating
incident warranting the dismissal of an employee who has been previously warned about their
substandard performance.36
Employees must also avoid insolence, which involves vocal defiance such as verbal abuse or
insults directed at the employer. Usually a single act of insolence will not amount to cause for
summary dismissal;37 however, it may do so when it is so egregious that it effectively destroys
the possibility of the employment relationship continuing or seriously harms the employer’s
economic interests.38 Insolence is most likely to meet that latter standard when it occurs in front
of other employees or customers and involves profanities, as that behaviour undermines the
authority of the employer.39 The decision discussed in Box 12.6 demonstrates how the courts
treat insolence as grounds for summary dismissal.
E. Harassment
Employees are prohibited from harassing co-workers or customers either by expressed contract terms or by virtue of an implied term. Work-related sexual and racial harassment in
particular are treated as serious employment offences that can give rise to cause for summary
dismissal, but other forms of harassment and bullying are also serious.40 However, harassment, even of a sexual or racial nature, is not always grounds for summary dismissal. Once
again, context matters. Harassment by a person in a position of authority is more likely to
justify summary dismissal, even if it is an isolated incident, recognizing the power dynamic,
the legal duty of the employer to prevent workplace harassment, and the vulnerability of the
victims (see the decision examined in Box 12.7).41 On the other hand, relatively minor harassment may warrant a warning but not termination for cause, especially if evidence exists that
the harassers did not realize their behaviour was offensive and they are contrite once informed
that it is.42
insubordination: A breach by an employee of the implied or expressed term of an employment contract requiring the employee to obey an employer’s orders and instructions.
insolence: An overt expression of defiance by an employee to the authority of the employer.
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Chapter 12 Summary Dismissal: Termination for Cause Without Notice 189
BOX 12.6 » CASE LAW HIGHLIGHT
Insolence as Cause for Summary Dismissal
Henry v. Foxco Ltd.
2004 NBCA 22
Key Facts: Henry was fired for insubordination and insolence
after seven years of employment with Foxco Ltd. One day,
Henry’s supervisor, Graham, asked Henry why he was taking
so long to remove decals from a vehicle and told him to hurry
up. Henry became belligerent and asked Graham what his
problem was. Graham responded by telling Henry that he
could quit if he was not happy. To that, Henry yelled, “If you
want to fire me, go ahead,” repeating this line multiple times.
Finally, Graham said, “Okay, you’re fired.” Henry sued for wrongful dismissal.
Issue: Did Henry’s behaviour amount to cause for summary
dismissal?
Decision: No. The court of appeal noted that a single, isolated
case of insolence will justify summary dismissal only under
three circumstances: (1) when it destroys the ability of the
employee and supervisor to maintain a working relationship;
(2) when the incident undermined the supervisor’s ability to
manage the workforce; or (3) when the incident caused the
employer material financial or reputational loss. None of these
circumstances existed in this case:
[The employer] did not establish that Mr. Henry’s
insolence led to irreparable harm to the working
relationship. Specifically, [it] did not establish that
this isolated incident rendered it impossible or impracticable for Mr. Henry and Mr. Graham to maintain a working relationship. …
There is no evidence to suggest that the verbal
confrontation had a prejudicial effect on Mr. Graham’s ability to supervise the work place effectively
or that [the employer’s] financial or business interests were prejudiced as a result of the incident. …
Many things are said and done in the heat of the
moment that, on reflection, are regretted by all. This
is one of those cases.
Henry was entitled to damages based on an assessment of
six months’ reasonable notice.
BOX 12.7 » CASE LAW HIGHLIGHT
Sexual Harassment by a Manager
van Woerkens v. Marriott Hotels of Canada Ltd.
2009 BCSC 73
Issue: Did VW sexually harass M and, if so, was this behaviour
grounds for summary dismissal without a warning?
Key Facts: van Woerkins (VW) was employed as a director of
sales and marketing. He had worked for Marriott for 22 years
with no discipline. In December 2006, VW attended the company’s holiday party in Vancouver where he was expected to
monitor alcohol consumption by employees and protect the
company’s interests, including ensuring employees did not
become too inebriated. A female employee, M, became very
drunk. After the company function, a group of employees including M retired to a hotel room to continue an “after party.”
VW attended and followed M into a bathroom where he
groped her. A couple of weeks’ later, VW phoned M at work
and invited her to meet him at a nearby bar to have their
“special meeting.” M declined the invitation and reported the
incidents to senior management. Management did an investigation and concluded that VW had sexually harassed M and
that the behaviour was sufficiently serious to provide grounds
for immediate summary dismissal. VW denied that he had followed M into the bathroom or touched her inappropriately.
He sued for wrongful dismissal.
Decision: Yes, the employer had grounds to terminate VW
without notice. VW had committed two serious employmentrelated offences. First, VW had followed an obviously drunk
and vulnerable subordinate employee into the bathroom
where he touched her in an inappropriate manner and afterwards attempted to contact her “for the purposes of determining whether there was an opportunity to pursue a sexual
relationship with her.” This behaviour constituted serious
sexual misconduct by a manager in a position of power.
Second, when confronted with M’s allegations, VW was
dishonest in denying that he went into the bathroom with M,
even though there were witnesses. This dishonesty undermined the employer’s trust in VW. The fact that the employer
had a “progressive discipline” policy does not prevent the
employer from terminating VW without a record of prior warnings. Serious misconduct that involves dishonesty and sexual
harassment can create grounds for immediate termination.
That was the case here.
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190 Part II The Common Law Regime
F. Violence and Threats of Violence
Acts of violence in the workplace are considered a serious breach of the employee’s obligations,
and a single act of workplace violence can give rise to summary dismissal.43 So too can threats
of physical violence made against an employee or the employer.44 However, in keeping with the
proportionality test, the courts will also consider mitigating factors that might have contributed
to the employee’s actions. A single incident of violence by an employee with an otherwise clean
disciplinary record may not be cause for summary dismissal, especially if the incident was provoked in some manner. For example, in Shakur v. Mitchell Plastics, no cause existed for summary
dismissal when an employee slapped a co-worker in the face after a verbal confrontation. Applying the proportional approach, the court ruled that the incident was a momentary outburst by
an otherwise good employee with six years’ service and no prior disciplinary problems. A warning or other lesser form of discipline would have been sufficient, the court ruled.45
G. Absenteeism and Lateness
There is an important difference in the law of work between “culpable” and “non-culpable”
absenteeism and lateness. A non-culpable absence, known as innocent absenteeism, is one in
which the employee is not blameworthy, such as absence due to a disability or religious reasons.
An employee cannot be disciplined for innocent absenteeism since they are not at fault. However, as explored in Chapter 11, an employer may still terminate the contract of an employee
based on the doctrine of frustration of contract if it can demonstrate to a court that the employee has (1) already been absent for a long period of time and (2) the medical evidence demonstrates that the employee is unlikely to be able to return to work in the foreseeable future.46 If
a court finds that either of those two conditions have not been established, then it will order the
employer to pay the employee damages based on the required period of notice even though the
employee was not able to work due to disability during the notice period.47
A key point to understand at this juncture of the book is that when an employee’s absenteeism
is due to a reason covered by human rights legislation, including disability, religion, and in some
cases family status, then the regulatory regime considered in Part III of this text intervenes in
the common law right of the employer to terminate the employee by giving notice. Human
rights statutes impose a duty to accommodate on the employer as a precondition to terminating
an employee for innocent absenteeism. We explore the duty to accommodate in Chapter 23.
When the absenteeism or lateness is unrelated to protected human rights’ grounds, the
courts’ approach is similar to that which we have already seen. As per the McKinley proportionality test, the courts consider all of the circumstances and decide if summary dismissal is a
proportional response to the employee’s absenteeism. Most employers making a case for summary dismissal based on tardiness attempt to build a record of prior problems accompanied by
clear warnings and a reasonable opportunity for the employee to correct the problem. The
approach is similar to that taken with respect to incompetence. The courts expect employers to
warn employees that their tardiness is unacceptable and to clearly explain that termination will
result if the problem is not corrected. An employee who receives clear warnings that continued
tardiness will result in termination and does not improve risks the court finding cause for summary dismissal.48
innocent absenteeism: An employee’s absence from work due to reasons that are not blameworthy, such as illness, disability,
or religious observance.
frustration of contract: The termination of a contract caused by an unforeseen event that renders performance of the contract
impossible.
duty to accommodate: A legal requirement in human rights law to take steps to remove discriminatory barriers to employment, including altering schedules, rules, or work patterns or changing the physical design of a workplace.
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Chapter 12 Summary Dismissal: Termination for Cause Without Notice 191
Although being absent or late without permission is a breach of contract, a single incident of
either would rarely constitute cause for summary dismissal unless accompanied by some other
form of misconduct.49 For example, if an employee fails to come to work in deliberate defiance
of an order to do so, then this may constitute cause, even as an isolated incident.50 Such defiance
violates the contractual prohibition on absenteeism and also amounts to serious insubordination. Similarly, an employee who lies to the employer about the reason for an absence is violating
the contractual requirement to be honest, as well as being absent without authorization.51 Moreover, persistent absenteeism or lateness combined with other performance problems can
together comprise cause for summary dismissal.52
H. Off-Duty Conduct
The implied obligation of employees to further the employer’s economic interests can reach
beyond the employer’s gates and capture off-duty employee behaviour. That does not mean that
every idiotic thing an employee does during their free time becomes the employer’s business and
exposes the employee to summary dismissal.53 However, when the employee’s off-duty conduct
potentially threatens the employer’s economic interests or the ability of the employee to perform
their job, then it becomes the employer’s business. Therefore, in off-duty conduct cases, the
courts assess whether a nexus (a link) exists between the employee’s behaviour and prejudice to
the employer’s legitimate business interests.54 The strength of that nexus can be related to the
particular job in question. For example, morally questionable behaviour by a teacher or child
counsellor outside of working hours may have a greater negative impact on the employer’s interests or the employee’s capacity to perform their job than would similar behaviour by a forklift
driver. The decision discussed in Box 12.8 provides an example of a context in which off-duty
conduct is cause for summary dismissal.
BOX 12.8 » CASE LAW HIGHLIGHT
Off-Duty Conduct as Cause for Summary Dismissal
Kelly v. Linamar Corporation
2005 CanLII 42487 (Ont. Sup Ct J)
Key Facts: Kelly was a long-service, well-respected management employee. He was arrested for possession of child pornography accessed off-hours on his home computer. Linamar
Corporation, his employer, was very visible in the community,
including in its support for local children’s organizations. The
arrest was widely reported in local media. The employer dismissed Kelly, who sued for wrongful dismissal.
Issue: Did the arrest of Kelly for possession of child pornography on his home computer constitute cause for summary
dismissal?
Decision: Yes. The court noted that 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” it attracted in the local media,
combined with the employer’s visible role in the community
as an advocate of children’s activities, created a nexus to the
employer’s legitimate business interests. The court summarized its decision as follows:
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.
I agree.
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192 Part II The Common Law Regime
A relatively new area of potential concern for employees is whether comments they make on
social media can be the basis for summary dismissal. The answer, applying the legal principles
just discussed, is that they can if they prejudice the employer’s economic interests, undermine
the employer’s trust and confidence in the employee, or poison the work environment.55 Some
recent media stories discussing employees who have been terminated for off-duty social media
posts are summarized in Box 12.9.
BOX 12.9 » TALKING WORK LAW
Terminated for Off-Duty Social Media Posts
Many Canadian employees have learned the hard way that they
can be terminated for comments or photos they post on their
social media accounts. Relatively few of these employees have
sued their employers, so there are not yet a lot of decided court
cases exploring terminations for social media posts. However,
we know from other off-duty conduct scenarios that courts will
consider whether the social media posts prejudice the employer’s legitimate economic and reputational interests or the
ability of the employee to perform their job; in these cases,
summary dismissal may be justified. Consider whether you
think a court would uphold the employer’s decision to summarily dismiss the employees in these two recent news stories.
Sportsnet Television Personality Terminated for
Twitter Post
On-air host Damian Goddard was terminated by Rogers
Sportsnet in 2011 after he tweeted his support for a professional hockey agent named Todd Reynolds, who had criticized
gay marriage. Goddard tweeted:
I completely and wholeheartedly support Todd
Reynolds and his support for the traditional and
TRUE meaning of marriage.
According to a Toronto Star article, Goddard “immediately
came under attack. Hours later, Sportsnet was forced to react
on its main Twitter feed. It ran several replies to angry viewers
repeating the same formula: ‘Today’s tweet from Damian Goddard does not reflect the views of Rogers Sportsnet.’” Goddard
tweeted in response that his tweets “reflect the views of Damian Goddard.” The following day, Goddard was terminated.*
Insensitive Facebook Post about Amanda Todd Costs Man
His Job
An employee of retailer Mr. Big and Tall was fired after he
posted an offensive comment on a memorial Facebook page
Damian Goddard.
set up to mourn Amanda Todd, a 15-year-old girl who committed suicide after suffering years of bullying. The employee
wrote, “It’s about time this bitch died.” A reader tracked down
the author and found his employer’s name on his Facebook
page. She then informed the employer of the comment. The
employer immediately fired the employee, telling the media
that the company has “zero tolerance for the mistreatment of
others no matter what form it takes.” †
* Kelly, C. “Fired Sportsnet Host Damian Goddard ‘Stands by’ Tweets,”
Toronto Star (2011), online: <https://www.thestar.com/
sports/2011/05/12/fired_sportsnet_host_damian_goddard_stands
_by_tweets.html>
† “Negative Amanda Todd Post Costs Man His Job,” CBC News (2012),
online: <https://www.cbc.ca/news/canada/calgary/
negative-amanda-todd-post-costs-man-his-job-1.1134230>
I. Inappropriate Use of Employer Technology
To state the obvious, when employees are at work, they are usually expected to be working.
When they are provided with a computer to perform their work, they are expected to work on
the computer and not surf porn or Facebook. The viewing of pornographic images at work in
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Chapter 12 Summary Dismissal: Termination for Cause Without Notice 193
particular exposes the employer to liability for allowing a poisoned work environment if the
images can be viewed by other employees. However, given what we have learned so far in this
chapter, it should not surprise you to learn that employee misuse of employer-provided technology is not always grounds for summary dismissal.
It depends on a number of factors. One is whether the employer has a clear Internet policy
that describes what is and is not permissible. Summary dismissal for viewing or distributing
pornographic material or engaging in non-work-related Internet activity on employer computers is more likely justified when the employer has a clear policy prohibiting such activities that
is known to the employee and consistently enforced by the employer. In that case, the employee
is engaging in deliberate insubordination.56 The courts also hold employees in managerial positions to a higher standard, since they are responsible for policing company policies and for
setting a positive example.57 If no clear and explicit policy prohibiting the viewing of pornography or using computers for personal use is in place, the courts usually require that the employee be warned before a dismissal for cause will be upheld. This requirement is especially
relevant if the material viewed by the employee is, according to one judge, “perfectly legal adult
pornography,” meaning that it is not a violation of the Criminal Code.58
J. Intoxication at Work
By now, you should be an expert in assessing how a court will deal with employee misconduct.
Let’s consider, lastly, an employee who reports to work intoxicated due to consumption of either
alcohol or illegal or legal (e.g., marijuana) drugs. That employee is clearly breaching an implied
(if not expressed) term of their contract. But can the employee’s employment contract be terminated for cause? The answer, of course, is “it depends”: Did the intoxication affect the ability
of the employee to perform their job? What is the nature of the job? (Does the job normally
entail some drinking?59 Is the job supervisory?60) Was the intoxication an aberration in an
otherwise stellar work record?61 What was the extent of the intoxication and the employee’s
behaviour while intoxicated?62 Is the employee’s job safety sensitive, so that the intoxication
posed a substantial risk?63 Had the employee previously been warned that termination could
result if the employee reported to work intoxicated?64
The situation becomes more complicated if the employee is an alcoholic or drug addict
because of the intersection of the regulatory standards regime and human rights statutes. Alcoholism and drug addiction are disabilities under human rights statutes, and therefore the contractual right of an employer to dismiss an employee with a substance addiction is restricted. In
addition to proving that the employee was intoxicated at work in violation of the employment
contract, and that this breach of contract was sufficiently serious to warrant summary dismissal,
human rights legislation requires an employer to establish that it has accommodated the
employee’s addiction to the point of “undue hardship.”65 We will consider the treatment of employee addictions under human rights laws in Part III.
IV. Chapter Summary
By this point in the text, we have learned that in the common law regime, an employer can dismiss an employee engaged under an indefinite-term contract at any time, for any or no reason
at all, simply by giving the employee notice of termination. In this chapter, we learned that an
employer can terminate the employment contract without notice when the employee commits a
serious breach of contract. The loss of the right to notice of termination is a big blow to an employee, so the courts have insisted that the employee’s misconduct be of a serious nature, such
that it undermines the foundation of the employment relationship. The “proportionality test”
developed by the Supreme Court of Canada guides the parties and the courts as they assess
whether the employee’s misconduct was grave enough to bring the contract to an effective end.
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194 Part II The Common Law Regime
QUESTIONS AND ISSUES FOR DISCUSSION
1. What is “summary dismissal”?
2. Describe the two-step proportionality test developed by the Supreme Court of Canada in
the case of McKinley v. BC Tel.
3. Explain the concepts of “cumulative just cause” and “culminating incident.” What must an
employer establish to justify summary dismissal of an employee based on cumulative just
cause?
4. Prepare a list of “mitigating factors” a judge might consider in assessing whether an employer had cause for summary dismissal.
5. In what circumstances can an employee’s behaviour outside of the workplace and during
non-working hours be grounds for summary dismissal?
APPLYING THE LAW
1. Jeremy had worked at County Beer Company as a forklift driver. Last week, he drove his forklift into a pallet
of empty beer bottles, breaking about 30 bottles. Alison, the human resources manager decided to terminate Jeremy for cause without notice. What information,
if any, would you like to know before assessing whether Alison’s decision is likely to hold up in a court if Jeremy challenged his termination?
2. Arisha was terminated for cause after she called in sick
last Tuesday. She has been employed for five years. The
employer pointed to the fact that Arisha had been absent for 13 days in the past year for a variety of reasons. Arisha had been given a written warning six
months ago after her twelfth absence that if she
missed another day of work without prior permission
she would be terminated. Four months ago, after Arisha missed a Friday before a long weekend, the employer decided to terminate her. However, because the
employer was very busy, the termination never took
place. With this last absence, the employer decided
that Arisha needed to go. Arisha sued the employer for
wrongful dismissal and argued that the employer did
not have cause to terminate her without notice. She
argued that the employer had condoned her absence
when it took no action four months’ earlier, and it
could no longer rely on the earlier written warning.
How do you think a court would respond to Arisha’s
argument?
3. Jacqueline was terminated from her job as a food
server at a local restaurant after her boss saw some of
Jacqueline’s publicly available Facebook and Twitter
posts. She had only been employed for six months. On
Facebook, Jacqueline posted a series of photos of herself with friends in what was obviously a very inebriated state. She appeared to be at a party. In one photo
she was dancing on a table in her underwear and in
another she appears to be vomiting on the sidewalk.
The only caption states, “What a party last night.”
Nothing on her Facebook page identifies her as an
employee of the restaurant, but her boss was repulsed
by the photos and does not believe that Jacqueline is
the sort of person he should employ. On Twitter, Jacqueline engaged in an extended discussion with unknown people in which she berated the restaurant
where she works and named the restaurant. She called
her boss “an idiot who knows nothing about running a
bar” and claimed, falsely, that “the bar doesn’t even
use real chicken” in their meals. The employer does not
have a written social media policy.
Considering the test for off-duty conduct examined
in this chapter, do you believe Jacqueline’s employer
has grounds for summary dismissal for the comments
she made on Facebook? How about her comments on
Twitter?
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Chapter 12 Summary Dismissal: Termination for Cause Without Notice 195
EXERCISE
A large volume of case law considers whether an employer had cause for summary dismissal of
an employee. Since 2001, judges have applied the proportionality test set out by the Supreme
Court of Canada in McKinley v. BC Tel, discussed in Box 12.1.
To learn how the courts have applied the proportionality test to employee misconduct, search
for cases that specifically reference the McKinley case. In this exercise, we “note up” the McKinley
case. Noting up means searching for cases that have considered and applied the reasoning in an
earlier case.
1. Go to the CanLII home page: <https://www.canlii.org>.
2. In the “Noteup” search box, type “McKinley v. BC Tel” and then choose “McKinley v. BC
Tel, 2001 SCC 38” from the drop-down menu that appears. That search should result in
more than 500 cases, most of which deal with disputes over whether an employer had cause
for summary dismissal. Select two or three of those cases and read them.
3. Prepare a case summary for each case that includes the key facts, the issue, and the decision, as well as answers to the following questions:
a. Did the employer rely on a single incident or cumulative just cause?
b. Did the court find that the employee engaged in misconduct? If so, what was the
misconduct?
c. If the employer relied on cumulative just cause, what was the culminating incident?
d. Did the court consider any mitigating factors and, if so, how did those factors influence
the court’s ultimate decision on whether the employer had cause for summary
dismissal?
e. Did the employer have cause for summary dismissal? What factors persuaded the
judge?
f. If the employer did not have cause, what remedy was ordered?
NOTES AND REFERENCES
1. R v. Arthurs, Ex p. Port Arthur Shipbuilding Co., 1967
CanLII 30 (Ont. CA); aff ’d [1969] SCR 85.
2. See R.S. Echlin & M. Certosimo, Just Cause: The Law of
Summary Dismissal in Canada (Aurora, ON: Canada Law
Book, 1997); and S. Rudner, You’re Fired! Just Cause for Dismissal in Canada (Toronto: Carswell, 2011).
3. See Henry v. Foxco Ltd., 2004 NBCA 22 at para 109; Hall v.
Boise Alljoist Ltd., 2006 NBCA 111; and Ogden v. Canadian
Imperial Bank of Commerce, 2014 BCSC 285 at para 216.
4. Ennis v. Canadian Imperial Bank of Commerce, 1986 CanLII
1208 (BCSC) (summary dismissal “can be justified only by
misconduct of the most serious kind”). See also the famous
note in the British decision Wilson v. Racher, [1974] ICR
428 at 430:
Many of the decisions which are customarily cited in
these cases date from the last century and may be
wholly out of accord with the current social conditions. What would today be regarded as almost an
attitude of Czar – serf, which is to be found in some of
the older cases … would, I venture to think, be
decided differently today. We have by now come to
realize that a contract of service imposes upon the
parties a duty of mutual respect.
5. F.H. v. McDougall, 2008 SCC 53. In this decision, the
Supreme Court ruled that the “balance of probabilities”
standard applies to all civil cases, rejecting an earlier line of
cases that applied a higher burden of proof in cases in
which employers accused employees of criminal behaviour,
such as theft.
6. Plester v. PolyOne Canada Inc., 2013 ONCA 47 at para 11.
7. See, e.g., Henry v. Foxco Ltd., supra note 3 (employee who
ignored an order [insubordinate] and swore at a supervisor
[insolent] had not “repudiated” the contract); Laws v.
London Chronicle, Ltd., [1959] 2 All ER 285 (CA) at 287;
and Stein v. British Columbia Housing Management Commission, 1992 CanLII 4032 (BCCA).
8. A distinction exists between employee misconduct
amounting to cause for summary dismissal and misconduct
constituting a repudiation of the contract by the employee.
A repudiation occurs when the employee refuses to
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196 Part II The Common Law Regime
perform an essential requirement of the contract. An employer can elect to accept the repudiation and treat the contract as having been terminated by the employee’s actions.
Some courts have noted that if the employer asserts repudiation rather than just cause, then the issue is whether the
refusal evinced an intention to treat the contract as at an
end, rather than whether the misconduct was sufficiently
serious to amount to cause for summary dismissal. See
Roden v. Toronto Humane Society, 2005 CanLII 33578
(Ont. CA); and Parkinson v. Kemh Holdings Limited, 2013
SKQB 172.
9. Lake Ontario Portland Cement Co. Ltd. v. Groner, [1961]
SCR 553; Carr v. Fama Holdings Ltd., 1989 CanLII 240
(BCCA); and Universal Cargo Carriers Corp. v. Citati,
[1957] 2 QB 401. If the employer learns the new facts but
sits on them for an unreasonable period of time before
raising them as grounds for termination, a court may afford
the facts less weight: Collette v. AMV Enterprises Ltd., 2014
BCSC 816.
10. McIntyre v. Hockin (1889), 16 OAR 498 at 501.
11. MacFarlane v. Westfair Foods Ltd., 1994 CanLII 9048
(Alta. QB); Parkinson v. Kemh Holdings Limited, supra note
8 (refusal by mechanic to install tire rims amounted to a
repudiation of the contract); Roden v. Toronto Humane
Society, supra note 8; Richards v. Rainy River Cattlemen’s
Association, 2012 ONCA 260. Note that there is no “duty
to warn” an employee who has repudiated the contract by
refusing to perform the essential duties of their job. Rather,
the employer may simply treat the contract as at an end.
12. See McKinley v. BC Tel, 2001 SCC 38 at para 51 (court
noting that cause for summary dismissal is often found in
cases of “theft, misappropriation or serious fraud”). See also
Steel v. Coast Capital Savings Credit Union, 2015 BCCA 127
(improper access and use of confidential documents);
Manak v. Workers’ Compensation Board of British Columbia,
2018 BCSC 182 (improper use of confidential documents);
Poirier v. Wal-Mart Canada Corp., 2006 BCSC 1138
(manager manipulating payroll documents); Steel v. Coast
Capital Savings Credit Union, 2015 BCCA 127 (single breach
of privacy rules); and van Woerkens v. Marriott Hotels of
Canada Ltd., 2009 BCSC 73 (harassment by a manager).
(Ont. Sup Ct J); Gillam v. Waschuk Pipe Line Construction
Ltd., 2011 SKQB 308 (ongoing harassment with culminating incident); and Parkinson v. Kemh Holdings Limited,
supra note 8.
15. Atkinson v. Boyd, Phillips & Co. Limited, 1979 CanLII 478
(BCCA); Nossal v. Better Business Bureau of Metropolitan
Toronto Inc., 1985 CanLII 1980 (Ont. CA); Lowery v.
Calgary (City of), 2002 ABCA 237; Henson v. Champion
Feed Services Ltd., 2005 ABQB 215; and Poliquin v. Devon
Canada Corporation, supra note 13.
16. Henson v. Champion Feed Services Ltd., supra note 15;
Brown v. Sears Ltd., 1988 CanLII 153 (NSSC); Lowery v.
Calgary (City of), supra note 15; Whitford v. Agrium Inc.,
2006 ABQB 726; Riehl v. Westfair Foods Ltd., 1995 CanLII
6086 (Sask. QB); Laszczewski v. Aluminart Products
Limited, 2007 CanLII 56493 (Ont. Sup Ct J); Webb v. Eaton
Yale Ltd., 2003 CanLII 29770 (Ont. Sup Ct J); Weyland v.
Famous Players Inc., 1999 ABQB 556; Gillespie v. 1200333
Alberta Ltd., 2011 ABPC 167; Oosterbosch v. FAG Aerospace
Inc., 2011 ONSC 1538; Caskanette v. Bong-Keun Choi Dentistry, 2016 ONSC 6448; Goncharova v. Marsh Lake Waste
Society, 2015 YKSM 4; Graf v. Saskatoon Soccer Centre Inc.,
2004 SKQB 282; and Kim v. International Triathlon Union,
2014 BCSC 2151. See also Duffett v. Squibb Canada Inc.,
supra note 13 at 42 (warnings need not be in writing, but
they must be sufficiently clear that the employee understands and appreciates their significance).
17. The “corrective theory of discipline” is well known in both
the labour arbitration setting in unionized workplaces
(see Part IV) and in human resources literature and practice. See M. Belcourt, G. Bohlander, & S. Snell, Managing
Human Resources, 6th ed (Toronto: Nelson, 2011)
at 532-34.
18. Oosterbosch v. FAG Aerospace Inc., supra note 16; Laszczewski v. Aluminart Products Limited, supra note 16; Dawson
v. FAG Bearings Ltd., 2008 CanLII 55459 (Ont. Sup Ct J);
and Tracey v. Swansea Construction, 1964 CanLII 271 (Ont.
Sup Ct J).
19. Crimi v. Sun Sun Holding, 2009 ABPC 394; McIntyre v.
Hockin, supra note 10 at 501; Jalan v. Institute of Indigenous
Government, 2005 BCSC 590; Booton v. Synergy Plumbing
and Heating Ltd., 2019 BCSC 276; Fleming v. J.F. Goode &
Sons Stationers & Office Supplies Ltd., 1994 CanLII 4361
(NSSC); and Kirk v. Nanaimo Literacy Association, 2018
BCSC 1217 (seven weeks’ delay between conduct and termination was not condonation in light of the circumstances).
13. McIntyre v. Hockin, supra note 10 at 502; Ross v. Willards
White Chocolate Ltd. (1927), 2 DLR 461 (Man. KB) at 469;
Matheson v. Matheson Industrial Trucks Ltd. (1984),
4 CCEL 271 (Ont. H Ct J); Daley v. Depco International Inc.,
2004 CanLII 11310 (Ont. Sup Ct J); Poliquin v. Devon
Canada Corporation, 2009 ABCA 216; Duffett v. Squibb
Canada Inc., 1991 CanLII 7038 (Nfld. SC); Chopra v. Easy
Plastic Containers Limited, 2014 ONSC 3666; and Ma v.
Columbia Trust Co. Ltd., 1985 CanLII 686 (BCSC).
20. McIntyre v. Hockin, supra note 10; Nossal v. Better Business Bureau of Metropolitan Toronto Inc., supra note 15;
and Backman v. Maritime Paper Products Limited, 2009
NBCA 62.
14. Grewal v. Khalsa Credit Union, 2012 BCCA 56; Daniels v.
Canadian Gift and Tableware Assn., 2003 CanLII 25192
21. McRae v. Marshall, [1891] 19 SCR 10; Confederation Life
Association v. Berry, [1927] SCR 595; Webster v. Excelsior
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Chapter 12 Summary Dismissal: Termination for Cause Without Notice 197
Life Insurance Company, 1984 CanLII 682 (BCSC);
and Vasquez v. Delcan Corp., 1998 CanLII 14741
(Ont. Sup Ct J).
22. The courts would likely interpret an ambiguous specific
penalty clause against the interests of the employer, applying the contra proferentem doctrine we discussed in
Chapter 8. See also Allman v. Yukon Consolidated Gold
Field Co., [1908] 8 WLR 373 (YCA) (a contract term allowing the employer to terminate the contract if it believed
there was cause must be applied by the employer “in good
faith and [in a] bona fide” manner). See also G. England,
Individual Employment Law, 2nd ed (Toronto: Irwin Law,
2008) at 341-42.
23. McKinley v. BC Tel, supra note 12. See also MacNaughton v.
Sears Canada Inc., 1997 CanLII 9530 (NBCA) (a minor
indiscretion by an employee that cost the employer $14 did
not “break the camel’s back” and destroy the employment
relationship).
24. For example, employees in the banking industry who have
access to financial information and funds are held to a very
high level of honesty and fidelity: Rowe v. Royal Bank of
Canada, 1991 CanLII 912 (BCSC) (summary dismissal was
affirmed for a bank employee who violated a rule against
personal relationships with customers); and Steel v. Coast
Capital Savings Credit Union, 2013 BCSC 527 (summary
dismissal was affirmed for a bank employee who viewed
another employee’s personnel file without permission).
Senior employees with high levels of authority are also held
to a very high level of trust: Robson v. Thorne, Ernst, &
Whinney, 1999 CanLII 2845 (Ont. CA) (summary dismissal
upheld for an account manager who engaged in tax fraud);
Dowling v. Ontario (Workplace Safety and Insurance Board),
2004 CanLII 43692 (Ont. CA); Poliquin v. Devon Canada
Corporation, supra note 13; and Bannister v. General Motors
of Canada Ltd., 1998 CanLII 7151 (Ont. CA) (a supervisor
is expected to stop sexual harassment, not engage in it).
25. The Supreme Court of Canada indicated in the McKinley
decision that “theft, misappropriation or serious fraud”
would normally be grounds for summary dismissal: McKinley v. BC Tel, supra note 12 at para 51. See also Ducharme v.
England, 1999 CanLII 1107 (BCSC); Lane v. Canadian
Depository for Securities Limited (1993), 49 CCEL 225 (Ont.
Gen Div); Geluch v. Rosedale Golf Assn., 2004 CanLII 14566
(Ont. Sup Ct J); Murphy v. Canadian Tire Corp. (1991), 39
CCEL 205 (Ont. Gen Div); and Kong v. Oshawa Group Ltd.
(1993), 46 CCEL 181 (Ont. Gen Div).
26. Kreager v. Davidson, 1992 CanLII 198 (BCCA); Todd v.
7-Eleven Canada Inc., 2004 ABQB 86; Chapell v. Canadian
Pacific Railway Company, 2010 ABQB 441; and Hill v. Dow
Chemical Canada Inc., 1993 CanLII 7097 (Alta. QB).
27. Deacon v. Imperial Tobacco Company Limited, 2007 BCSC
1794 (falsification of time records to create the appearance
that the employee was working longer hours is cause for
dismissal); Zerr v. North Vancouver (District), 2006 BCSC
1819 (deliberate falsification of mileage claims is cause);
and Courchesne v. INCO Ltd., 2005 CanLII 20802 (Ont. Sup
Ct J) (a scheme to misappropriate product from employer
is cause).
28. Erlund v. Quality Communication Products Limited (1972),
29 DLR (3d) 476 (Man. QB); Matheson v. Matheson International Trucks Ltd., supra note 13; Duffett v. Squibb
Canada Inc., supra note 13; Rowe v. Keg Restaurants Ltd.,
1996 CanLII 1975 (BCSC); Cottrill v. Utopia Day Spas and
Salons Ltd., 2017 BCSC 704; Brien v. Niagara Motors
Limited, 2008 CanLII 41823 (Ont. Sup Ct J); and Kitcher v.
The Royal Canadian Legion, 2003 MBQB 266.
29. Balzer v. Federated Co-operatives Limited, 2018 SKCA 93
(single serious breach of well-known safety practices creating risk to public and workers).
30. The leading case describing the duty to warn in relation to
incompetence in particular is Brown v. Sears Ltd., supra
note 16. See also Jardine v. Hillside, 2005 NBQB 275; and
Babcock v. C. & R. Weickert Enterprises Ltd., 1993 CanLII
3112 (NSCA) and comments and cases cited in note 11,
supra.
31. Knowlan v. Trailmobile Parts & Services Canada Ltd., 2006
BCSC 337; and Fraser v. Proscience Inc., 2005 CanLII 21549
(Ont. Sup Ct J).
32. Middelkoop v. Canada Safeway Limited, 2000 MBCA 62.
33. See supra note 11 and accompanying text.
34. See Stein v. British Columbia Housing Management Commission, supra note 7; Kirk v. Nanaimo Literacy Association,
supra note 19; Chaba v. Ensign Drilling Inc., 2002 ABPC
131; Amos v. Alberta, 1995 CanLII 9287 (Alta. QB); Laws v.
London Chronicle (Indicator Newspapers) Ltd., [1959] 2 All
ER 285 (CA) at 288, 270; Panton v. Everywoman’s Health
Centre Society (1988), 2000 BCCA 621; Karmel v. Calgary
Jewish Academy, 2015 ABQB 731; Wilson v. KP Manufacturers (Calgary) Ltd., 1998 CanLII 18141 (Alta. QB); Beaudoin v. Agriculture Financial Services Corporation, 2018
ABQB 627; and Marmon v. The Authentic T-Shirt Company,
2019 ONSC 205.
35. MacKinnon v. Lewis Energy Management Inc., 1999 CanLII
2167 (Ont. CA); Honda Canada Inc. v. Keays, 2005 CanLII
8730 (Ont. Sup Ct J), partially rev’d on other grounds 2008
SCC 39 (refusal of an employer order to meet with the
company doctor is not cause for dismissal because the employee reasonably believed the order infringed his rights
under a human rights statute).
36. Parkinson v. Kemh Holdings Limited, supra note 8.
37. Bohay v. 567876 Saskatchewan Ltd., 2009 SKPC 128; Henry
v. Foxco Ltd., supra note 3; Donovan v. New Brunswick Publishing Co. Ltd., 1996 CanLII 4832 (NBCA) (telling the boss
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198 Part II The Common Law Regime
to “shove it” is not grounds for summary dismissal);
Regdos v. Atlantic Dental Laboratories Ltd., 2007 NBQB
188; and Streng v. Northwestern Utility Construction Ltd.,
2016 BCPC 161.
38. Bennett v. Cunningham, 2006 CanLII 37516 (Ont. Sup Ct J)
at para 34; Henry v. Foxco Ltd., supra note 3 at para 111;
Claire v. Moore Corp. (1989), 29 CCEL 41 (Ont. DC);
Fortier v. Kal Tire, 2006 BCPC 223; Rysstad v. Dependable
Turbines Ltd., 2007 BCSC 474; and Wise v. Broadway Properties Ltd., 2005 BCCA 546 (employee compared his boss,
an elderly Jewish man, to a Nazi slave camp).
39. Henry v. Foxco Ltd., supra note 3 at paras 118-20; Regdos v.
Atlantic Dental Laboratories Ltd., supra note 37 (calling a
supervisor a “piece of shit” does not justify summary dismissal when it occurs in private). Contrast with Codner v.
Joint Construction, 1989 CanLII 4852 (Nfld. SC) (calling a
president a “fucking liar” justifies summary dismissal even
though it took place in private).
40. Geluch v. Rosedale Golf Assn., supra note 25 at para 92;
Gillam v. Waschuk Pipe Line Construction Ltd., supra note
14; Dotchin v. Saskatchewan (Workers’ Compensation
Board), 2002 SKQB 279; and Neigum v. Wilkie Co-operative
Association Ltd., 1987 CanLII 4786 (Sask. QB).
41. Bannister v. General Motors of Canada Ltd., supra note 24;
Simpson v. Consumers’ Assn. of Canada, 2001 CanLII 23994
(Ont. CA); Fleming v. Ricoh Canada Inc., 2003 CanLII 2435
(Ont. Sup Ct J); Menagh v. Hamilton (City), 2007 ONCA
244; van Woerkens v. Marriott Hotels of Canada Ltd., supra
note 12; Leach v. Canadian Blood Services, 2001 ABQB 54;
Gonsalves v. Catholic Church Extension Society of Canada,
1998 CanLII 7152 (Ont. CA); Gillam v. Waschuk Pipe Line
Construction Ltd, supra note 14; and Foerderer v. Nova
Chemicals Corporation, 2007 ABQB 349.
42. Fonceca v. McDonnell Douglas Canada (1983), 1 CCEL 51
(Ont. H Ct J); MacDonald v. Valley Credits Ltd. (1988), 12
ACWS (3d) 358 (BCSC); Geluch v. Rosedale Golf Assn.,
supra note 25; Brazeau v. International Brotherhood of Electrical Workers, 2004 BCCA 645; Tse v. Trow Consulting Engineers Ltd. (1995), 14 CCEL (2d) 132 (Ont. Gen Div); and
Hodgins v. St. John Council for Alberta, 2007 ABQB 275,
aff ’d 2008 ABCA 173. See the discussion of mitigating
factors to be considered in harassment cases in Alleyne v.
Gateway Co-operative Homes Inc., 2001 CanLII 28308 (Ont.
Sup Ct J).
46. Hydro-Quebec and Syndicat des employees techniques Professionnelles et de bureau d’Hydro-Quebec, 2008 SCC 43. Some
courts have found that an employment contract is “frustrated” when an employee’s illness or disability will prevent
the employee from performing their job for the foreseeable
future: Wightman Estate v. 2774046 Canada Inc., 2006
BCCA 424.
47. Sylvester v. British Columbia, [1997] 2 SCR 315; Lippa v.
Can-Cell Industries Inc., 2009 ABQB 684; Sandhu v. North
Star Mills Ltd., 2007 BCSC 1222; and Whitford v. Agrium
Inc., supra note 16. See also Antonacci v. Great Atlantic &
Pacific Co. of Canada, 1998 CanLII 14734 (Ont. Sup Ct J),
aff ’d 2000 CanLII 5496 (Ont. CA), noting that the doctrine
of frustration requires consideration of the human rights’
duty to accommodate. Contrast Novakowski v. Canadian
Linen & Uniform Service Co, 2015 ABQB 53 at para 89, suggesting that the duty to accommodate does not apply in the
common law regime.
48. Elliott v. Parksville (City of), 1990 CanLII 806 (BCCA);
Fleming v. J.F. Goode & Sons Stationers & Office Supplies
Ltd., supra note 19; S.S. v. Huang & Danczkay Property
Management Inc., 1999 CanLII 14865 (Ont. Sup Ct J);
Thompson v. Flemming, 2009 NBQB 340; Riley v. Crown
Trust Co., [1977] 5 AR 1 (TD); Pagnotta v. Read Jones
Christoffersen Ltd., 1990 CanLII 5944 (Alta. QB) (excessive
absenteeism not cause for dismissal); and Rutkowski v.
Edmonton Transit Mix & Supply Co. Ltd., 2007 ABQB 277.
49. Minott v. O’Shanter Development Company Ltd., 1999
CanLII 3686 (Ont. CA); and Bailey v. Service Corporation
International (Canada) ULC, 2018 BCSC 235.
50. Aeichele v. Jim Pattison Industries Ltd., 1992 CanLII 986
(BCSC); Riley v. Crown Trust Co., supra note 48; and
Marmon v. The Authentic T-Shirt Company, supra note 34.
51. Hunter v. Webcentrex Inc., 2007 NSSM 35.
52. See, for example, Oosterbosch v. FAG Aerospace Inc., supra
note 16; and Gichuru v. Smith, 2013 BCSC 895.
44. Dilg v. Dr. D. Sarca Inc., 2007 BCSC 1716.
53. Off-duty conduct not grounds for summary dismissal:
Backman v. Hyundai Auto Canada, 1990 CanLII 4087
(NSSC) (not cause for dismissal when an employee is
charged with drug trafficking, since there is no harm to the
employer’s interests); Klonteig v. West Kelowna (District),
2018 BCSC 124 (no cause for dismissal when the assistant
fire chief was arrested for driving an employer vehicle while
intoxicated in off-hours); Merritt v. Tigercat Industries, 2016
ONSC 1214 (arrest for sexual assault against minors); and
Fleming v. Ricoh Canada Inc., supra note 41.
45. Shakur v. Mitchell Plastics, 2012 ONSC 1008. See also Ditchburn v. Landis & Gyr Powers, Ltd., 1997 CanLII 1500 (Ont.
CA) (drunken fight with a client is not grounds for
summary dismissal); and Phanlouvong v. Northfield Metal
Products (1994) Ltd., 2014 ONSC 6585 (punching a coworker is not grounds for summary dismissal).
54. Cases in which off-duty conduct was found to be grounds
for summary dismissal: Harrop v. Markham Stouffville Hospital, 1995 CanLII 7295 (Ont. Sup Ct J) (the relationship of
a nurse with a former psychiatric patient); Canadian Imperial Bank of Commerce v. Boisvert (1986), 68 NR 355 (FCA)
(a bank employee’s relationship with a bank robber);
43. Izzard v. Cosmopolitan Industries Ltd., 2002 SKQB 200.
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Chapter 12 Summary Dismissal: Termination for Cause Without Notice 199
Whitehouse v. RBC Dominion Securities Inc., 2006 ABQB
372 (investment adviser brought prostitute to his office after
hours); Kelly v. Linamar Corporation, 2005 CanLII 42487
(Ont. Sup Ct J) (arrest for child pornography on home
computer); and Smith v. Kamloops and District Elizabeth
Fry Society, 1996 CanLII 2897 (BCCA) (social worker in a
relationship with a client).
55. There are surprisingly few cases to date in which a
non-union employee has challenged their termination for
comments made on social media. In Kim v. International
Triathlon Union, 2014 BCSC 2151, the court ruled that no
cause for summary dismissal existed when a communications employee made comments on social media that were
potentially harmful to the employer’s interests in large part
because the employee had not been warned. Given the
employee was a communications officer it is not clear that
this case involved “off-duty conduct.” There are numerous
cases involving unionized employees fired for social media
posts, which we will look at in Part IV of this book.
The BC Labour Relations Board upheld the dismissal of
two employees for Facebook comments that derided and
threatened supervisors: Lougheed Imports Ltd.
(West Coast Mazda) v. United Food and Commercial
Workers International Union, Local 1518, 2010 CanLII
62482 (BCLRB). Racist or sexist comments, or comments
that are derogatory to a particular religion, can also violate
human rights legislation: Perez-Moreno v. Kulczycki, 2013
HRTO 1074. See also J. Teitel, “Fired over Facebook:
The Consequences of Discussing Work Online” (2012)
2:2 UWO J Legal Stud 3.
56. Poliquin v. Devon Canada Corporation, supra note 13; and
Backman v. Maritime Paper Products Limited, 2008 NBQB
219; aff ’d 2009 NBCA 62.
57. Foerderer v. Nova Chemicals Corporation, supra note 41;
Poliquin v. Devon Canada Corporation, supra note 13; and
Wong v. Lantic Inc., 2012 ABQB 716.
58. Asurion Canada Inc. v. Brown and Cormier, 2013 NBCA 13.
59. See MacDonald v. Northern Breweries Ltd., [1989] OJ
No. 3331 (QL) (DC) (the dismissal of a beer salesman who
lost his licence after impaired driving was not just cause).
60. Rose v. Marystown Shipyard Limited, 1985 CanLII 1829
(Nfld. CA).
61. Ditchburn v. Landis & Gyr Powers Ltd., 1995 CanLII 7290
(Ont. Sup Ct J); and Robinson v. Canadian Acceptance
Corp., [1974] 9 NSR (2d) 226 (CA).
62. Dziecielski v. Lighting Dimensions Inc., 2012 ONSC 1877
(a drunk employee caused a life-threatening vehicle crash
on a busy highway, so termination for cause was upheld);
and Whitehouse v. RBC Dominion Securities Inc., supra note
54 (a drunk employee who brought a prostitute to the office
is dismissed for cause); van Woerkens v. Marriott Hotels of
Canada Ltd., supra note 12 (manager’s intoxication affected
his poor judgment, which contributed to his termination
for harassment).
63. Anstey v. Canadian National Railway Co. (1980), 27 Nfld.
and PEIR 95 (Nfld. CA) (summary dismissal of a drunk
boat captain is upheld); Murphy v. Sealand Helicopters Ltd.,
1988 CanLII 5402 (Nfld. SC); and Birchall v. Canadian Helicopter Ltd., 1998 CanLII 4176 (BCSC) (dismissal is upheld
of a helicopter pilot who reported to work with an alcohol
level above the lawful limit).
64. Blomgren v. Jingle Pot Pub Ltd., 1999 BCCA 9 (an employee
had been given a clear warning that intoxication at work
would result in termination); and Volchoff v. Wright Auto
Sales Inc., 2015 ONSC 8029 (employee was not warned that
consumption of alcohol could lead to termination).
65. Chopra v. Syncrude Canada Ltd., 2003 ABQB 504; and
Whitford v. Agrium Inc., supra note 16.
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C H A P T E R 13
“You Forced Me to Quit!”: The Special
Case of Constructive Dismissal
LEARNING OBJECTIVES
CHAPTER OUTLINE
After reading this chapter, students will
be able to:
I. Introduction 201
II. The Legal Concept of “Constructive Dismissal” 202
A. Constructive Dismissal Based on Employer Behaviour That May Not Breach a Term of the Contract
but That Makes Continued Employment “Intolerable” 203
B. Constructive Dismissal Based on Substantial Breach of an Essential Term of the Contract 204
III. Common Scenarios That Give Rise to a Constructive Dismissal 205
A. Changes to an Employee’s Compensation and Benefits 205
B. Changes to an Employee’s Job Assignment 206
C. Reassignment of an Employee to a Different Work Location 208
D. “Don’t Come to Work!”: Unpaid Disciplinary Suspensions, Temporary Layoffs, and Administrative
Leaves or Suspensions 209
E. Employee Harassment or a Poisoned Work Environment 210
IV. Employee Acceptance and Condonation of the Employer’s Repudiation of Contract 211
V. Chapter Summary 212
Questions and Issues for Discussion 212
Exercise 213
Notes and References 213
• Define and explain constructive
dismissal.
• Recognize common situations in which
constructive dismissal arises.
• Explain the various tests used by the
courts to decide whether a
constructive dismissal has occurred.
• Describe the legal options available to
an employee confronted with a serious
breach of the employment contract by
an employer.
I. Introduction
Andy Murray was excited to be hired as an assistant coach of the Winnipeg Jets of the National
Hockey League. He agreed to a three-year fixed-term contract that paid him in excess of
$100,000 per year. Murray was good at his job. However, as often happens with pro sports teams,
the organization’s management decided to shuffle its coaching staff about halfway through the
three-year period. Management reassigned Murray to the position of hockey scout. Murray
would be paid the same salary, but being a hockey scout was much less desirable than being an
assistant coach. Murray refused to accept the reassignment and insisted he remain in the assistant coach job he was hired to perform. Management refused, so Murray quit. As a result of the
contract coming to an early end, Murray lost out on about $150,000 that would have been paid
to him had the contract run for the full three-year term.
What should happen in this situation? Murray brought the employment relationship to
an end by quitting without notice. Therefore, maybe Murray should forfeit the money.
Then again, it was the employer’s actions, in removing Murray from the job he was hired to
perform and assigning him to a less desirable job, that really caused the breakdown of the relationship. Had the employer just left Murray in his coaching position, no problems would have
arisen.
201
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202 Part II The Common Law Regime
The question of whether an employee must tolerate a unilateral change in working conditions
is at the core of the law of constructive dismissal. A constructive dismissal occurs when an
employer commits a fundamental breach of contract or otherwise behaves in a manner that
makes the workplace intolerable for the employee, and the employee responds by treating the
contract as having been terminated by the employer.1 Since a constructive dismissal results in
the termination of the employee’s employment contract, the employee can recover damages
based on the failure of the employer to provide notice of termination. Therefore, constructive
dismissal is a special type of wrongful dismissal. The word “constructive” refers to the fact
that constructive dismissal is a legal invention (a legal “construct”): the court “constructs” a termination based on the employer behaving as if it no longer intends to be bound by the contract,
even though the employer never utters the words “you are terminated.”2
In the Winnipeg Jets case described above, the court ruled that the employer had committed
a constructive dismissal by reassigning Murray without his agreement. The judge wrote:
The contract employed Murray as a coach and for no other purpose. The action of the Jets reflected
a material change in Murray’s employment agreement. It went to the essence of the contract and
amounted to a repudiation that entitled Murray to treat the agreement as at an end.3
The Jets were ordered to pay Murray close to $150,000 in damages, reflecting his lost wages
for the remaining period of the three-year contract. In this chapter, we will review the basic
principles and tensions that shape the law of constructive dismissal. We will also examine some
of the most common sorts of employer behaviour that give rise to constructive dismissal.
II. The Legal Concept of “Constructive Dismissal”
Constructive dismissal is based on the doctrine of repudiation of contract. A repudiation of
contract occurs when a party behaves in a manner that demonstrates they no longer intend to
be bound by the terms of the contract. Usually this behaviour involves a substantial (sometimes
called “fundamental” or “repudiatory”) breach of an essential term of the contract, but sometimes an intention to no longer be bound by a contract can be demonstrated by a pattern of
behaviour that overall demonstrates this intention.4 The innocent party can elect to treat the
contract as having been terminated, which entitles that party to damages for any loss resulting
from that termination.
In the case of constructive dismissal, the employer’s “repudiatory” conduct does not automatically bring the contract to an end. Rather, a constructive dismissal occurs only when the
employee accepts an employer’s repudiation of contract by quitting and suing for constructive
dismissal.5 The language of “acceptance” here can be confusing. It does not mean that the employee accepts the employer’s behaviour. Instead, it means that the employee is accepting that
the employer has terminated the employment contract.
The onus is on the employee to prove that a constructive dismissal has occurred. Often the
constructive dismissal results from a single, substantial breach of contract by the employer.
However, just as an employer may rely on an accumulation of wrongful acts by the employee to
justify summary dismissal (see Chapter 12), so too can constructive dismissal be based on the
constructive dismissal: A fundamental change to an employment contract by an employer that an employee may treat as
an effective termination of the contract.
repudiation of contract: A breach of contract that demonstrates an intention by the party to treat the contract as at an end
and to no longer be bound by the contract.
acceptance of an employer’s repudiation of contract: When an employee responds to a repudiation of the employment
contract by the employer by treating the contract as over and quitting.
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Chapter 13 “You Forced Me to Quit!”: The Special Case of Constructive Dismissal 203
cumulative effect of less serious breaches of contract by an employer (called cumulative effect
constructive dismissal).6
In a 2015 decision called Potter v. New Brunswick Legal Aid Services, the Supreme Court of
Canada recognized two types (or branches) of constructive dismissal:7
1.Constructive dismissal based on employer behaviour that may not breach a term of the
contract but that makes continued employment “intolerable.”
2. Constructive dismissal based on substantial breach of an essential term of the contract.
Most cases are decided applying the second branch of constructive dismissal. Let’s consider
each branch separately.
A. Constructive Dismissal Based on Employer Behaviour That May Not Breach
a Term of the Contract but That Makes Continued Employment “Intolerable”
The origins of this branch of constructive dismissal are quite recent and date from a 2000 decision of the Ontario Court of Appeal in a case called Shah v. Xerox Canada Ltd.8 In that case, the
court ruled that an employer had constructively dismissed the employee by engaging in a pattern of harassment and false allegations against the employee spanning a period of six months.
The court ruled that it was not necessary for an employee to point to the breach of any particular
clause of the contract in cases where the employer’s behaviour overall makes “continued
employment intolerable.” In applying this branch of constructive dismissal, courts apply an
objective test (see discussion in Chapter 7) and ask whether a “reasonable employee” in the
circumstances would conclude that the employer no longer intended to be bound by the contract by making the employee’s continued employment “intolerable.”9
BOX 13.1 » CASE LAW HIGHLIGHT
Did the Employer Constructively Dismiss the Employee by Hiring a Man Who Had Sexually
Harassed Her Years Earlier?
Colistro v. Tbaytel
2019 ONCA 197
Key Facts: C had been employed for 20 years by Tbaytel. In
January 2007, the employer announced it was hiring Benoit as
a vice-president. C was shocked and upset by this because in
the mid-1990s, Benoit had been terminated from the company
after sexually harassing C and others. C went on sick leave and
was diagnosed with post-traumatic stress disorder. She demanded that the employer not hire Benoit. The employer refused and went ahead with Benoit’s hiring, offering to transfer
C to another building. C refused to be transferred, quit, and
filed a lawsuit for constructive dismissal.
Issue: Did the hiring of Benoit make C’s continued employment intolerable and therefore amount to a constructive
dismissal?
Decision: Yes. The Ontario Court of Appeal ruled that the
employer’s behaviour made continued employment intolerable for the employee. The test is whether a “reasonable employee” in the employee’s situation would find that the
employer’s behaviour made the workplace intolerable.
The employer’s behaviour can take the form of a series of
harmful actions (cumulative effect) or a single serious act by
the employer. In this case, a reasonable employee would find
that the employer’s decision to hire a man who had earlier
been terminated for harassing C, knowing that this caused C
trauma, would render continued employment intolerable for
C. Therefore, the employer had constructively dismissed C. The
employer was ordered to pay damages to C based on 12
months’ reasonable notice, plus additional damages of
$100,000 for bad faith in the manner of dismissal (see Chapter
14 for a discussion of damages).
cumulative effect constructive dismissal: A constructive dismissal that is founded on an accumulation of breaches of the
employment contract by the employer, none of which alone would be serious enough to constitute a constructive dismissal.
objective test: A legal test used in interpretation of contracts and statutes that asks, “What would a reasonable person of
normal intelligence think, if told about the circumstances?” Contrast with subjective test.
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204 Part II The Common Law Regime
It is worth noting that in most cases in which the court has ruled that employer behaviour
made continued employment “intolerable,” the employee could alternatively have argued the
second branch of constructive dismissal (constructive dismissal based on a fundamental breach
of the contract) on the basis that the employer committed a substantial breach of the implied
contract term requiring decency, civility, respect, and dignity, discussed in Chapter 9.10
B. Constructive Dismissal Based on Substantial Breach of an Essential Term
of the Contract
Most constructive dismissal decisions apply the second branch of the test, which requires the
courts to answer three questions:
1. What are the express and implied terms of the contract, and did the employer breach
one of those terms?
2. If the employer breached a contract term, then was that breach “substantial” and detrimental to the employee? In answering this question, the courts again apply an “objective
test” and 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.11
3. Did the employee “accept” the repudiation and treat the breach as having terminated
the contract?
Many constructive dismissal cases turn on how the court answers the second question. A
relatively minor breach of contract by an employer will not be sufficient to repudiate the contract as a whole. An employee who treats a non-substantial breach of contract (i.e., a less serious
breach that does not demonstrate an intention to treat the contract as at an end) by the employer
as a constructive dismissal has simply resigned. As we discuss below, an employee must elect
whether to “accept” the repudiation (question 3 in the list above) within a reasonable period of
time. If the employee does not, then a court may rule that they have condoned the employer’s
breach, the consequence of which is that an action for constructive dismissal would be barred
(dismissed by the court).
The leading case in Canada on the law of constructive dismissal based on a substantial breach
of contract is Farber v. Royal Trust Co., summarized in Box 13.2. Since 1997, hundreds of decisions have been issued dealing with alleged constructive dismissal that cite Farber. The exercise
at the end of this chapter focuses on researching these decisions. The remainder of this chapter
explores various common scenarios that can give rise to a constructive dismissal based on a
substantial breach of an expressed or implied term of the contract by the employer.
BOX 13.2 » CASE LAW HIGHLIGHT
Change to Job Duties Resulting in What the Employee Believes Will Be a Substantial Pay Cut
Farber v. Royal Trust Co.
[1997] 1 SCR 846
Key Facts: Farber was employed by Royal Trust Co. as regional
manager for western Quebec, responsible for supervising
some 21 offices and over 400 employees. The employer restructured and eliminated that job. It offered Farber his old job,
as manager of a single underperforming branch, and told him
his pay in that job would be based on commissions alone.
Farber estimated that his compensation would be cut in half
in this job. Rather than report to the new job, Farber quit and
sued for constructive dismissal. It turned out that the branch
Farber would have been transferred to did better than expected, and had Farber reported to that job, his loss of pay
would not have been as great as he anticipated.
condonation: When a party that could have treated the employment contract as having been repudiated (terminated) by the
other party’s breach of the contract elects not to treat the contract as being repudiated.
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Chapter 13 “You Forced Me to Quit!”: The Special Case of Constructive Dismissal 205
Issue: Was Farber constructively dismissed by his job
reassignment?
Decision: Yes. The Supreme Court of Canada explained the
test for constructive dismissal based on a substantial breach
of the employment contract as follows:
[W]here 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.
The Supreme Court noted a number of prior decisions in
which the courts had found that a demotion to a less pres-
tigious job warranted a finding of constructive dismissal.
Applying this law, the court ruled that Farber’s reassignment
“altered the essential terms of the employment contract”
and that “at the time the offer was made, any reasonable
person in the same situation as the appellant would have
come to that conclusion.” Thus, the test is whether a “reasonable employee” would conclude that the employer is
altering an essential term of the contract, given the facts as
understood at the time the change is proposed. Therefore,
what actually happened at the branch after Farber quit was
irrelevant, since Farber could not have looked into the future
to see that the branch would perform unexpectedly well.
Farber was constructively dismissed and was entitled to
damages based on a period of one year’s reasonable
notice.
III. Common Scenarios That Give Rise to a Constructive Dismissal
A. Changes to an Employee’s Compensation and Benefits
For many employees—probably most—the compensation clause is the most important in the
employment contract. After all, most of us work in order to be paid. Judges know this, and they
have said that cuts to compensation go to the “root of the employment contract.”12 Therefore,
when employers breach the compensation clause by cutting an employee’s pay, they are treading
in dangerous waters. Any significant reduction in an employee’s pay that is not accepted by an
employee will amount to a fundamental breach of the employment contract, giving the employee the right to quit and claim damages for constructive dismissal. The question that arises
is whether the pay cut is substantial enough to amount to a fundamental breach, as opposed to
a non-fundamental breach.
A unilateral cut to an employee’s base pay of 15 percent or more will almost certainly constitute a substantial breach of the employment contract, which the employee can treat as a constructive dismissal.13 That type of case is clear-cut. More difficult to predict is how the courts
will deal with smaller pay cuts amounting to less than 15 percent. The courts seem to be influenced in these close cases by the broader circumstances that surround the change. For example,
in Pullen v. John C. Preston Ltd., a 10 percent cut in pay was found not to be grounds for a constructive dismissal where the judge believed that the company “was in serious difficulty.”14 In
contrast, a 10 percent pay cut combined with other changes to a sales employee’s territory was
found to be a constructive dismissal in the case of Benell v. William E. Coutts Co.15
Sometimes the employee does not know for sure how significantly a job change will affect
them at the time they need to decide whether to “accept” the employer’s breach of contract and
sue for constructive dismissal. That was the situation in the important Farber decision discussed
in Box 13.2.
When the cut is to the employee’s base pay, as opposed to supplemental benefits (health care,
vacation time, etc.) or variable pay (such as a discretionary bonus), it is more likely to be considered a fundamental breach. An employer who says, “I will not pay you the base wage rate we
agreed upon” is considered to be expressing the sentiment that it no longer intends to abide by
an essential term of the contract.16 Variable pay, on the other hand, is expected to fluctuate, and
the courts have long implied the right of employers to make relatively minor changes to supplevariable pay: A portion of an employee’s compensation that varies from time to time based on the employee’s or company’s
performance or the discretion of the employer.
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206 Part II The Common Law Regime
mental benefits.17 However, non-payment of a bonus that the employee had earned and that
would reasonably be expected based on the contract and past practice can still amount to a
constructive dismissal.18
B. Changes to an Employee’s Job Assignment
In the course of the employment relationship, employers will sometimes want to move employees into different jobs for any number of reasons. Constructive dismissal lawsuits arise when the
employee does not accept the move and instead elects to quit. The first question the courts must
then consider is whether the contract confers a right on the employer to unilaterally reassign the
employee. A contract could include an expressed right for employers to reassign employees,
although few reported decisions rely on such clauses. However, we know from Chapter 9 that
even if there is no clear, expressed contractual right for the employer to reassign the employee,
this right may exist as an implied contract term.
The courts have found that employers have an implied right to make “reasonable” reassignments and to shuffle job tasks.19 As an Ontario Court of Appeal justice wrote in the case of
Canadian Bechtel Ltd. v. Mollenkopf: “[an employee has] no vested right in the particular job
initially given to him. If the employer … acted in good faith and in the protection of its own
business interests, the plaintiff would have no right to refuse the transfer.”20 This implied managerial right to move employees around is a holdover from the old master and servant law
(detailed in Chapter 5) and a reminder that in the common law regime, the employer is the boss
and entitled to a certain latitude in running its operation.21
As noted, the implied right of an employer to reassign job tasks is not unlimited. The courts
have imposed a reasonableness requirement on this right. In practice, the reasonableness
requirement can be described by reference to the following three factors:
1. The reassignment must be made for good-faith business reasons, and not as a guise to
force the employee to quit.22
2. The reassignment or change in duties must be relatively minor, involve skills within the
employee’s general capabilities, and not amount to a fundamental shift in the type of
work the employee was hired to perform.23 The more substantial the change in duties,
the more likely a court will find it amounted to a fundamental breach of contract.
3. If the reassignment results in a demotion, then it is far more likely to constitute a constructive dismissal.24
A demotion involves a reassignment to a less prestigious job with less responsibility and
often, though not necessarily, less pay. In Farber, the Supreme Court of Canada observed that
the courts have often held that a demotion “is a substantial change to the essential terms of an
employment contract that warrants a finding that the employee has been constructively dismissed.”25 Usually a demotion will justify a finding of constructive dismissal, unless an expressed
contractual right is given to the employer to demote26 or the demotion is very minor27 or temporary.28 In contrast, a lateral transfer or promotion, even in the face of an objection from the
employee, will usually not be treated by the courts as a constructive dismissal. The case discussed in Box 13.3 considers whether a lateral transfer is grounds for a constructive dismissal.
demotion: A reassignment of an employee’s position by an employer to another position with lower pay, less prestige, or
less responsibility.
lateral transfer: A reassignment of an employee’s position to another position that is roughly equal in terms of pay, prestige,
and responsibility.
promotion: A reassignment of an employee’s position by an employer to another position with higher pay, more prestige,
and more responsibility.
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Chapter 13 “You Forced Me to Quit!”: The Special Case of Constructive Dismissal 207
BOX 13.3 » CASE LAW HIGHLIGHT
When Is a Reassignment a Constructive Dismissal?
Dykes v. Saan Stores Ltd.
2002 MBQB 112
Key Facts: Dykes was employed as manager of human resources for Saan Stores Ltd. He had no written employment
contract with his employer. The employer received several
complaints from employees about Dykes’s abrasive management style. In response, the employer decided to create a new
position for Dykes: manager of human resources planning and
development. The new position paid the same salary and was
still a human resources management position. However, he
would no longer supervise as many employees, and his role as
manager of customer relations was removed. Dykes did not
want the new position and also feared he was “being set up to
fail” in the new position so that the employer could later dismiss
him for cause. Dykes quit and sued for constructive dismissal.
Issue: Did the employer commit a fundamental breach of the
employment contract in reassigning Dykes to a new management position?
Decision: No. The court found that an implied term in Dykes’s
employment contract permits the employer to reassign his
duties within the human resources management function,
provided that the duties he is assigned are within his abilities
and skill set. Dykes’s compensation was not cut, nor was he
demoted, since he remained a senior human resources manager at the same level. The reassignment was not based in bad
faith, but was a response to legitimate concerns about conflict
between Dykes and his subordinates in his old job. Therefore,
the employer did not commit a fundamental breach of any
contract term.
BOX 13.4 » TALKING WORK LAW
Balancing Competing Interests in Constructive Dismissal Law
The doctrine of constructive dismissal provides some protection to an employee who is being driven to quit by an employer that is hoping to avoid the legal requirement to give
notice of termination. However, in most constructive dismissal
cases, the employer has no intention of driving the employee
out or of terminating the contract. Usually the employer is
making changes for what it believes are legitimate business
reasons. For example, the employer is restructuring to improve
efficiency or to lower expenses in the face of competition. In
these situations, the doctrine of constructive dismissal pits the
employer’s legitimate business interests against the employee’s interests in preserving the bargain as set out in the original
employment contract.*
How do the courts balance these competing interests? Do
they favour the employer’s economic interest in flexibility or
the employee’s interest in preserving the status quo? The latter
approach could be justified on the basis that employers are
in a position of power and usually draft employment contracts, a fact the courts have long recognized, as noted in
Chapter 10. If employers want a right to make unilateral
changes to working conditions, including job functions and
compensation schemes, then they could include an expressed
contractual right to make those changes, perhaps with some
amount of notice to the employee.† Moreover, as we learned
in Chapter 8, an employer can always change working conditions by terminating the contract with proper working notice
(or pay in lieu of notice) and offering a new contract
based on the revised terms. When employers opt not to pursue either of these courses of action, employees should be
entitled to insist on maintenance of the past and existing
arrangements.
On the other hand, the option of terminating the contract
with notice and offering a new contract can be costly and slow
for an employer that needs to quickly adapt to market threats.‡
An alternative approach would be to grant employers wide
latitude to make changes to working conditions, provided that
those changes are made in good faith and without malice.§
This approach would give employers considerable flexibility,
which could help improve efficiency, increase profits, and
protect employers from market threats. However, this approach would leave employees vulnerable to sudden, unexpected changes to their jobs.
The contemporary approach of Canadian courts falls somewhere in between the contrasting approaches just described.
While the courts have restricted the right of employers to make
significant changes without employee consent, they have also
granted employers significant latitude to make less drastic
changes to respond to economic challenges. Some authors
have argued that the courts give employers wider latitude to
make unilateral changes to working conditions in difficult
economic conditions, as described in this passage from a
casebook on constructive dismissal:
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208 Part II The Common Law Regime
In prosperous economic times, courts may narrow
an employer’s latitude to vary the employment contract. The “necessity” of changing the terms of employment without an employee’s consent may not
be as evident in a positive business climate. Accordingly, when an employer is faced with difficult economic conditions, the need to reorganize in order
to remain competitive or, in some cases, to merely
survive is more often justified by the courts.#
This passage suggests that developments in the broader
economic and market subsystem (discussed in Chapter 2) influence the outcomes of constructive dismissal disputes. It
implies also that judges are influenced by the employer’s
motive in making a unilateral change rather than the pure
contract question of whether the employer’s actions amount
to a fundamental change to the original contract. However, in
Farber (see Box 13.2), the Supreme Court noted that a “bad
faith” motive by the employer, or an intention to force an employee to quit, is not a necessary component of a constructive
dismissal. As we work through our discussion of the case law,
pay attention to how the courts have struck a balance between
employer and employee interests in their reasoning.
* See R.S. Echlin and J. Fantini, Quitting for Good Reason: The Law of
Constructive Dismissal in Canada (Aurora, ON: Canada Law Book, 2001)
at 197.
† Many cases have taken this strict contractualist approach to the right of
employers to make unilateral changes to the contract: Brown v. Canada
Biscuit Co. Ltd., [1935] SCR 212; and Corker v. University of BC, 1990 CanLII
748 (BCSC). See also G. England, “Recent Developments in Individual
Employment Law: Tell Me the Old, Old Story” (2002) 9 CLELJ 43 at 65-66,
considering if a contract clause permitting an employer to make
unilateral changes to any contract term would render the contract void
since the content of the offer and acceptance would be too vague.
‡ See G. England, “Recent Developments in Individual Employment Law:
Tell Me the Old, Old Story” (2002) 9 CLELJ 43 at 62.
§ This approach seems to rule the day in Black v. Second Cup Ltd., 1995
CanLII 7270 (Ont. Sup Ct J); Gillespie v. Ontario Motor League Toronto
Club (1980), 4 ACWS (2d) 87 (Ont. H Ct J); and Purdy v. Vancouver Island
Helicopters, [1988] BCJ No. 2157 (QL) (SC).
# Echlin and Fantini at 197. See also Hamilton & Olsen Surveys Ltd. v. Otto,
1993 ABCA 233.
C. Reassignment of an Employee to a Different Work Location
A reassignment to a different geographical location is treated in a similar manner to a reassignment of job duties. The courts begin by asking whether an expressed contract term exists permitting the employer to transfer the employee to a new location. If so, then that term will govern the
transfer. For example, no constructive dismissal was found where an employer transferred an
employee from Vancouver, British Columbia, to Thompson, Manitoba, when the contract
included an expressed right for the employer to relocate the employee “in order to satisfy business
conditions.”29 Alternatively, if a contract very clearly provides that the employee will remain in one
location, then a transfer out of that location would constitute a fundamental breach of contract.
Absent an expressed contractual right for employers to relocate employees, the courts consider whether an implied right exists governing relocation. Here again, the courts have struck a
balance and implied a right for employers to require “reasonable” geographical relocations, as
captured in this often-cited passage from the Ontario Court of Appeal in the case of Smith v.
Viking Helicopter Ltd.:
It has never been my understanding that an employee is entitled to a job for life in a place of his
choosing. If he wishes to remain an employee of a given company, he must expect reasonable dislocations in that employment including the place where it is to be performed. There was no evidence in
this case that Viking acted unreasonably in notifying the respondent of its intended move or of its
desire that he and others should accompany it. The sole complaint was about its lack of timeliness
and specificity as to what moving expenses it would be prepared to absorb.30 [Emphasis added]
Whether the relocation is “reasonable” depends on a number of factors. The relocation must
be based on legitimate business reasons and not intended to punish the employee or drive them
to quit. If the job in the new location would involve a demotion or a pay cut, then it is more likely
to amount to a constructive dismissal, for the reasons discussed above. If the job is of a sort in
which geographical transfers are common and expected, then it is more likely a court will find
the right to relocate is implied in the contract. Thus, executives employed by companies with
multiple locations and in jobs and industries where job mobility is common are often assumed
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Chapter 13 “You Forced Me to Quit!”: The Special Case of Constructive Dismissal 209
to have agreed that the employer may relocate them.31 In some cases, the courts have found
relocations to be unreasonable, and therefore a fundamental breach of contract, when the move
would impose a serious hardship on the employee’s economic or family life.32
D. “Don’t Come to Work!”: Unpaid Disciplinary Suspensions, Temporary
Layoffs, and Administrative Leaves or Suspensions
There are a variety of circumstances in which an employer refuses to permit an employee to
work for a period of time. These include disciplinary suspensions, temporary layoffs, and administrative leaves or suspensions. The first two are usually unpaid, while an administrative
leave may be with or without pay. In all of these circumstances, the question arises whether the
employer is contractually permitted to refuse an employee the right to perform their job. Keep
in mind that the basic exchange at the foundation of the employment contract is a promise by
the employer to pay compensation to an employee in exchange for that employee coming to
work and performing their job.
Therefore, Canadian courts have ruled that, absent an expressed or implied term in the contract permitting layoffs, a layoff of an employee is a breach of contract that an employee may
treat as a constructive dismissal. The Ontario Court of Appeal explained this point in the 2011
decision in Elsegood v. Cambridge Spring Service:
At common law, an employer has no right to lay off an employee. Absent an agreement to the contrary, a unilateral layoff by an employer is a substantial change in the employee’s employment and
would be a constructive dismissal.33
An employer could avoid constructive dismissal by including an expressed contract term
permitting temporary layoffs, which is common in the case of collective agreements in unionized workplaces, but relatively few non-union employment contracts include layoff terms.
Some Canadian courts have found that a short paid suspension for performance-related
concerns does not give rise to grounds for a constructive dismissal.34 However, an unpaid disciplinary suspension of an employee will usually amount to constructive dismissal if the employee
refuses to accept it.35 (See Box 13.5.) An unpaid suspension is only permitted in two situations.
First, the contract could include an expressed or implied contractual right for the employee to
be suspended without pay. An implied right to suspend could be based on a history of the employer issuing unpaid suspensions that is well known and accepted by the employee. Second, if
the employee’s misconduct leading to the suspension was serious enough to justify summary
dismissal for cause, then the employer may be permitted to opt instead to apply unpaid suspension, which is a lesser form of discipline.36 Thus, if the employer defends a constructive dismissal
lawsuit based on an unpaid suspension by arguing that it had cause for summary dismissal, the
court must consider the law of summary dismissal (see Chapter 12).
An administrative leave or suspension occurs when an employer orders an employee to stay
home for reasons other than a lack of work (i.e., a layoff) or discipline. For example, an employer
might place an employee on administrative leave while it investigates whether the employee had
done something wrong or while a criminal charge brought against the employee makes its way
through the courts. In these cases, courts have generally ruled that an employer may temporarily
place an employee on leave until the investigation concludes, but only if (1) there is a nexus
between the allegations against the employee and the employer’s business interests (similar to
the question considered in cases of termination for off-duty conduct considered in Chapter 12);
administrative leave: A period of time during which an employer refuses an employee the right to report to work for reasons
other than a lack of work (i.e., a layoff) or discipline (i.e., a suspension), usually during the period of an ongoing investigation
into possible employee misconduct.
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210 Part II The Common Law Regime
and (2) the leave is with pay.37 So, for example, in the 2018 case Filice v. Complex Services, the
Ontario Court of Appeal ruled that an administrative suspension of a security guard accused of
theft pending the outcome of an investigation was justified, but the decision of the employer to
treat the suspension as unpaid constituted a constructive dismissal.38
BOX 13.5 » CASE LAW HIGHLIGHT
Disciplinary Unpaid Suspensions as Constructive Dismissal
Carscallen v. FRI Corp.
2006 CanLII 31723 (Ont. CA)
Key Facts: Carscallen worked for FRI Corp. and was responsible
for shipping certain materials to her boss who was attending
a conference in Spain. She failed in this task, and her employer
responded by suspending her indefinitely without pay.
Carscallen quit and sued her employer for constructive
dismissal.
Issue: Did the disciplinary unpaid suspension of Carscallen
amount to a fundamental breach of the employment contract
and therefore a constructive dismissal when Carscallen quit in
response to the suspension?
Decision: Yes. The court noted that no expressed contractual
right to suspend without pay existed in the employment con-
tract. Therefore, the court considered whether it should imply
such a right. Applying the tests for implying contract terms
(discussed in Chapter 9), the court ruled that there was no
implied term permitting unpaid suspensions: such a term was
not necessary to give “business efficacy” to the contract, and
it was not obvious that both parties would have agreed that
such a term was part of the contract. Absent a contractual right
to suspend Carscallen without pay, the suspension amounted
to a constructive dismissal, unless Carscallen’s actions were so
serious that the employer had cause for summary dismissal
without notice. The court considered the law of summary
dismissal and found that Carscallen’s mistake was not serious
enough to justify summary dismissal. Therefore, the employer
had no right to dismiss Carscallen for cause and no right to
suspend her without pay. Carscallen was entitled to damages
based on a period of nine months’ reasonable notice.
In its recent decision in Potter v. New Brunswick Legal Aid Services Commission, mentioned
earlier in the chapter, the Supreme Court of Canada considered whether an employer constructively dismissed an employee by placing the employee on a paid “administrative suspension”
while it attempted to bargain a buyout of the employee’s fixed-term contract. The court ruled
that an employer has an implied right to place an employee on paid administrative leave if it
does so in good faith, and the suspension is both “reasonable and justified” in the circumstances.
The court ruled that the suspension of Potter failed to meet this standard because the employer
failed to communicate honestly with the employee about the reason for the suspension and was
also secretly exploring whether they could terminate Potter for cause.39
E. Employee Harassment or a Poisoned Work Environment
Recall from Chapter 9 that since the late 1990s, an implied contract term requires employers to
treat their employees with “decency, civility, respect, and dignity.” An employee subjected to
serious workplace harassment that violates that contract term could quit and sue for constructive dismissal.40 In addition, as we noted earlier in this chapter, courts have recently also
found that harassment or unfair treatment of an employee can lead to a constructive dismissal
finding if the court rules that a reasonable employee would conclude that the employer’s behaviour has made the workplace “intolerable” for the employee, even if the court does not rely on a
breach of any particular contract term.41
Therefore, as noted above, harassment or bullying by an employer can result in a constructive
dismissal finding applying either of the branches of constructive dismissal examined in this
chapter. However, not every little criticism or negative comment by an employer will be enough
to establish a constructive dismissal. For example, courts have said that the threshold must be
high enough to permit legitimate expressions of concern and frustration by an employer.42
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Chapter 13 “You Forced Me to Quit!”: The Special Case of Constructive Dismissal 211
A court is most likely to find a constructive dismissal when a representative of management
engaged in the harassment or the employer failed to take steps to investigate and stop harassment by a co-worker once it became aware of it. For a refresher on this point, look back at the
case of Lloyd v. Imperial Parking Ltd.,43 discussed in Box 9.3 in Chapter 9.
IV. Employee Acceptance and Condonation of the Employer’s
Repudiation of Contract
The employer’s fundamental breach of contract does not itself bring the contract to an end. As
noted earlier, the employee must “accept” the employer’s repudiation of contract and treat the
contract as at an end by quitting.44 It is obvious why employees may not want to treat the
employer’s breach of contract as a constructive dismissal. To do so means losing one’s job. Many
employees just want the employer to comply with the contract; they do not want to quit. However, an employee faced with an employer breach of contract is in a difficult and vulnerable
position.45 When an employer commits a fundamental breach of an employment contract, the
employee essentially has three options, as summarized in Box 13.6.46
BOX 13.6 » TALKING WORK LAW
Employee Options When an Employer Repudiates an Employment Contract
When an employer “repudiates” an employment contract by
committing a fundamental breach of the contract, the employee has the following three options:*
Option 1: “Condone” the employer’s breach of contract
The employee can condone the employer’s breach of contract.
This means that the employee does not object to it. If an employee condones a breach, they are prohibited from later
trying to argue a constructive dismissal based on that breach.
However, an earlier breach of contract by an employer can still
be relied upon later by an employee as forming part of a series
of breaches that together amount to a cumulative effect constructive dismissal, a concept explained earlier in this chapter.
Option 2: “Accept” the employer’s breach of contract, and
treat the contract as terminated (constructive dismissal)
The employee can “accept” the employer’s breach of contract
by quitting and taking the position that the employer’s breach
brought the contract to an end. This option treats the employer’s actions as a constructive dismissal. The employee must
“accept” the breach—that is, quit—within a “reasonable” period
of time, a malleable concept that is left to judges’ discretion.
Option 3: Protest the employer’s breach of contract,
without quitting, and insist that the employer comply
with the original contract terms
The employee may choose not to quit in response to the
employer’s substantial breach of contract and instead insist
that the original terms of the contract be complied with. The
employee must clearly indicate that they are not agreeing to
the change or condoning the employer’s breach of contract.
The employer then has the option of continuing to comply
with the original contract terms or terminating the original
contract by giving proper notice. If the employer allows an
employee to continue to work, despite the employee’s objection to the employer’s breach, then the work is being performed according to the terms of the original contract. If the
employer refuses to comply with those terms, the employee
can later sue the employer to enforce the original contract
terms.
* These options are discussed in Hill v. Peter Gorman Ltd., 1957 CanLII 393
(Ont. CA); Wronko v. Western Inventory Service Ltd., 2008 ONCA 327; and
Potter v. New Brunswick Legal Aid Services Commission, 2015 SCC 10; as
well as in Chapter 7.
In option two presented in Box 13.6, the employee must “accept” the employer’s repudiation
of contract within a reasonable time period. If the employee does not quit within a reasonable
time period, then the court may rule that the employee condoned the breach (option one) and
is therefore prohibited from treating it as a constructive dismissal.47 (Recall that if the employer
had unilaterally changed the contract terms for its own benefit, such as by reducing the employee’s compensation, the change must still be supported by mutual consideration to be enforceable, as we learned in Chapter 7.)
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212 Part II The Common Law Regime
What constitutes a “reasonable” period of time depends on the facts in each case, and the
courts’ decisions on this point have varied widely. For example, one court found that an employee who did not quit for 11 days after changes to his contract were made had condoned the
breach.48 However, most judges have provided employees with a much longer period of time to
elect whether to quit.49 The Ontario Court of Appeal noted in one case that allowing employees
a reasonable time to reflect on their decision recognizes the vulnerability of employees and the
“difficulty of making … life-altering decisions” and also “promotes stability and harmonious
relations in the workplace.”50 Thus, for example, a seven-month delay before quitting was found
not to amount to condonation in Tilbe v. Richmond Realty Ltd.51
Let’s demonstrate the three options described in Box 13.6 by considering the situation of an
employee who shows up to work one day and is informed by their employer that their pay has
been cut by 50 percent.52 As we learned above, that change clearly amounts to a substantial
breach of contract. Now consider the three options available to the employee. First, they could
condone the change by not objecting and just continue to work under the changed terms (option
one). If they do that, then they cannot later quit and allege that they were constructively dismissed by virtue of the pay cut. Second, they could “accept” the breach of contract, quit, and sue
for constructive dismissal (option two). Third, they could reject the pay cut by clearly advising
their employer that they do not agree to the change (option three), but keep working. The employer could then respond by terminating the employee’s original contract with proper notice
and offer a new contract at a lower pay rate, as we learned in Chapter 7. However, if the employer
permits the employee to keep working, then that work is being performed under the terms of
the original contract.53 Continuing to work does not amount to agreement to the pay cut if the
employee has informed the employer that they do not agree to the change. If the employer starts
paying them the reduced rate, the employee can later sue for breach of contract to recover any
damages caused by that breach.
V. Chapter Summary
Constructive dismissal is a branch of the law of wrongful dismissal. It occurs when an employer commits a fundamental or “repudiatory” breach of the employment contract that the
employee elects to treat as having terminated the contract. Since a constructive dismissal
results in the termination of the contract by the employer, the employee may be entitled to
damages based on the failure of the employer to provide proper contractual notice of termination. Constructive dismissal law involves a complex balancing of the employer’s interest in
flexibility and the interest of employees in stability under their contracts of employment. We
saw that not every breach of contract is serious enough to justify a finding of constructive
dismissal and that employees must elect whether to treat a fundamental or repudiatory
breach of contract by the employer as a constructive dismissal within a reasonable amount
of time.
QUESTIONS AND ISSUES FOR DISCUSSION
1. Describe the two “branches” of constructive dismissal.
2. What three questions do the courts consider when dealing with constructive dismissal
lawsuits involving an alleged substantial breach of the contract?
3. Describe the three options available to an employee confronted with an employer who
commits a fundamental breach of the employment contract.
4. Explain the meaning of the following terms in the context of constructive dismissal law:
(1) condonation, (2) acceptance, and (3) repudiation.
5. Why might an employee not want to treat a breach of contract by the employer as a constructive dismissal?
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Chapter 13 “You Forced Me to Quit!”: The Special Case of Constructive Dismissal 213
APPLYING THE LAW
1. In the summer of 2022, Lloyds Moving Company experiences a slowdown in customers, and the owners
decide they need to temporarily lay off three workers
for one month, including Mark Alexander. Mark comes
to you for advice. He is considering a move to Britain
and is not sure he wants to return to Lloyds Moving
Company even if he is recalled to work next month.
Mark has been employed for 10 years, and he has never been laid off before. He never signed a written employment contract. Advise Mark of his legal options if
he decides to move to Britain.
2. For several months now, Lisa has experienced sexual
harassment by her supervisor. The supervisor constantly makes jokes about Lisa’s body and touches her on
the shoulder and back and invites her for drinks and to
his apartment after work. She has asked him to stop
talking to her and she has reported her concerns to
the human resources manager, but no steps have been
taken to ensure the supervisor’s behaviour changes.
Lisa is fed up and suffering from anxiety and has decided she can no longer come to work. She wants to
move on and find another job. Lisa comes to you for
advice. Explain whether Lisa could make a strong constructive dismissal argument.
3. The Great T-Shirt Factory is a large clothing company.
Sherry has been employed in the accounting department as a financial auditor for five years. The company
has decided to restructure the accounting department
for business reasons and intends to transfer Sherry to a
new position called “bookkeeper.” The new job will pay
the same as the financial auditor job Sherry currently
holds, and Sherry would report to the same manager
of accounting. The tasks would change slightly, with
Sherry doing less work on tax matters and more work
on tracking inventory and accounts receivable. Sherry
is angry because she believes that moving from the
job of “financial auditor” to “bookkeeper” sounds like a
demotion and will be perceived as such by her colleagues. She raises these concerns with management
and management comes to you for advice. Do you
think the change would give Sherry grounds for a constructive dismissal claim?
EXERCISE
In Box 13.2, we considered the Supreme Court of Canada case of Farber v. Royal Trust Co. That
case has become the leading authority on constructive dismissal in Canada and, as such, has
been regularly cited in constructive dismissal cases since.
To learn how the courts have dealt with constructive dismissal, search for cases that reference
the Farber case. In this exercise, we “note up” the Farber case.
1. Go to the CanLII home page: <https://www.canlii.org>.
2. In the “Noteup” search box, type “Farber v. Royal Trust Co.” and select “Farber v. Royal
Trust Co., 1997 CanLII 387 (SCC)” from the drop-down menu that appears. That search
should result in hundreds of cases from the period after 1997. Select one of those cases and
read it.
3. Prepare a case summary that includes the key facts, the issue, and the decision as well as
answers to the following questions:
a. What contract term was alleged to be breached?
b. Was the contract term breached?
c. If so, was the breach found to be fundamental or repudiatory?
d. Did the employee condone the breach?
e. Did the constructive dismissal argument succeed? If yes, what damages were
awarded?
NOTES AND REFERENCES
1. Potter v. New Brunswick Legal Aid Services Commission,
2015 SCC 10; Farber v. Royal Trust Co., [1997] 1 SCR 846.
(Although the Civil Code of Quebec applied to the contract
in Farber, the Supreme Court of Canada noted that the law
of constructive dismissal in Quebec was essentially the
same as in the common law model.)
2. Ibid. at para 30.
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214 Part II The Common Law Regime
3. Murray v. Jets Hockey Ventures, 1996 CanLII 18145 (Man.
QB) at para 13.
4. Potter v. New Brunswick Legal Services, supra note 1;
Farber v. Royal Trust Co., supra note 1. Classic early British
cases that explain the doctrine of repudiation of contract
based on behaviour evincing an intention to no longer
be bound by the contract include Rubel Bronze & Metal
Co. v. Vos, [1918] 1 KB 315; and Western Excavating (ECC)
Ltd. v. Sharp, [1978] ICR 221 (CA). Repudiation of contract can also be established based on an indication of an
intention to commit a fundamental breach of contract.
When the employer announces to the employee that
it intends to take action that would amount to a
fundamental breach of contract, it is known as an
“anticipatory breach of a fundamental term of the contract.” The employee can respond by advising the employer that they will accept the repudiation and treat the
contract as at an end: Davies v. Canadian Satellite Radio
Inc., 2010 ONSC 5628.
5. The importance of “acceptance” of the repudiation is
explained in this often-cited passage from Howard v. Pickford Tool Co. Ltd., [1951] 1 KB 417 at 421: “An unaccepted
repudiation is a thing writ in water and of no value to
anybody: it confers no legal rights of any sort or kind.” See
also Farquhar v. Butler Brothers Supplies Ltd., 1988 CanLII
185 (BCCA); and Lemay v. Canada Post Corp., 2003 CanLII
36637 (Ont. Sup Ct J).
6. Kussmann v. AT & T Capital Canada Inc., 2002 BCCA 281;
Luth v. Norwood Project Management Ltd., 1995 CanLII 853
(BCSC); and Drapeau v. Spielo Manufacturing Incorporated,
2007 NBQB 113.
7. Potter, supra note 1.
8. Shah v. Xerox Canada Ltd., 2000 CanLII 2317 (Ont. CA).
See also Whiting v. Winnipeg River Brokenhead Community
Futures Development Corp., 1998 CanLII 19422 (Man. CA);
and Colistro v. Tbaytel, 2019 ONCA 197 (workplace rendered
intolerable when employer hired a person who years earlier
sexually harassed an existing employee). The Supreme Court
of Canada affirmed the legitimacy of this branch in Potter v.
New Brunswick Legal Services, supra note 1 at paras 33, 42.
Other cases applying this approach can be located by “noting
up” Shah v. Xerox on the CanLII website.
9. See Potter, supra note 1 at paras 42, 47; and Colistro v.
Tbaytel, supra note 8 at para 52.
10. Colistro v. Tbaytel, supra note 8 at para 50 (noting that in
the case of harassment, the two branches overlap since the
employee could rely on the implied term requiring civility
and decency or the Shah v. Xerox approach requiring that
the employee demonstrate that continued employment is
intolerable). See analysis in D. Doorey, “Employer Bullying:
Implied Duties of Fair Dealing in Canadian Employment
Contracts” (2005) 30 Queen’s LJ 500.
11. The Supreme Court preferred the word “substantial” over
“fundamental” breach in Potter, supra note 1 at paras 34-35.
On the application of an “objective test,” see also Farber v.
Royal Trust Co., supra note 1 at para 26; Halifax Herald
Limited v. Clarke, 2019 NSCA 31; Chapman v. GPM Investment Management, 2017 ONCA 227; Filice v. Complex Services Inc., 2018 ONCA 625; Orth v. Macdonald Dettwiler &
Associates Ltd., 1986 CanLII 170 (BCCA); General
Motors of Canada Ltd. v. Johnson, 2013 ONCA 502; and
R.S. Echlin & J. Fantini, Quitting for Good Reason: The Law
of Constructive Dismissal in Canada (Aurora, ON: Canada
Law Book, 2001) at 20. Note that in the Potter decision, the
Supreme Court ruled that courts can consider evidence of
the employer’s behaviour that was not known to the employee at the time they quit in assessing whether the employer breached the contract, but cannot consider this
evidence in relation to the second question, which is
whether a reasonable employee would have considered the
employer’s breach was “substantial.”
12. Farquhar v. Butler Brothers Supplies Ltd., supra note 5.
13. Farber v. Royal Trust Co., supra note 1 (change would lead
to an estimated 50 percent pay cut); Davies v. Canadian
Satellite Radio Inc., supra note 4 (60 percent pay cut was a
fundamental breach); Olsen v. Sprung Instant Greenhouses
Ltd. (1985), 12 CCEL 8 (Alta. QB) (45 percent pay cut was
fundamental); Evans v. Fisher Motor Co. Ltd., [1915] 8
OWN (H Ct J) (33 percent pay cut); Farquhar v. Butler
Brothers Supplies Ltd., supra note 5 (30 percent pay cut);
Ziten v. Sadie Moranis Realty Corporation, 2015 ONSC 7987
(40 percent pay cut); Bisnar v. Caltec Scientific Ltd., [1995]
BCJ No. 2915 (QL) (PC) (20 percent pay cut); Bergmann v.
CPT Canada Power Technology Ltd., 1997 CanLII 14843
(Alta. QB) (25 percent pay cut); Evangelista v. Number 7
Sales Limited, 2008 ONCA 599 (cut in commission salesperson’s rate from 18 percent to 9 percent of gross profits);
and Luth v. Norwood Project Management Ltd., supra note 6
(15 percent pay cut).
14. Pullen v. John C. Preston Ltd. (1985), 7 CCEL 91 (Ont. H Ct
J); aff ’d (1987), 16 CCEL xxiii (CA) (reduction in a base
salary from $30,000 to $27,000 was not a fundamental
breach).
15. Benell v. William E. Coutts Co. (1994), 50 ACWS (3d)
241 (Ont. Sup Ct J). See also English v. Toyota Plaza Ltd.,
1995 CanLII 10467 (Nfld. SC) (the imposition of a
requirement for the employee to pay the $850 cost of a
training program amounted to constructive dismissal);
and Pulak v. Algoma Publishers Ltd., 1995 CanLII 7277
(Ont. Sup Ct J) (10 percent cut to base pay was a
constructive dismissal).
16. Poole v. Tomenson Saunders Whitehead Ltd., 1987 CanLII
2647 (BCCA); Hamilton & Olsen Surveys Ltd. v. Otto, 1993
ABCA 233; Pathak v. Jannock Steel Fabricating Company
(1996), 21 CCEL (2d) 12 (Alta. QB); Chapman v. Bank of
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Chapter 13 “You Forced Me to Quit!”: The Special Case of Constructive Dismissal 215
Nova Scotia, 2007 CanLII 18732 (Ont. Sup Ct J); Wylds v.
Burns Fry Ltd., [1993] OJ No. 1042 (QL) (Gen Div); and
Leversage v. Swan Valley Foods Ltd. (1982), 16 ACWS (2d)
223 (BCCA).
17. Poole v. Tomenson Saunders Whitehead Ltd., supra note 16;
Chapman v. Bank of Nova Scotia, 2008 ONCA 769; and
Brent Chapman v. GPM Investment Management and
Integrated Asset Management Corporation, 2015 ONSC
6591 (failure to pay a 10 percent bonus not grounds for
a constructive dismissal).
18. Wood v. Owen De Bathe Ltd., 1998 CanLII 6578 (BCSC),
aff ’d 1999 BCCA 29; and Piron v. Dominion Masonry Ltd.,
2013 BCCA 184.
19. MacKenzie v. Ralston Purina Canada Inc. (1981), 9 ACWS
(2d) 110; and Tymrick v. Viking Helicopters Ltd. (1985), 6
CCEL 225 (Ont. H Ct J).
20. Canadian Bechtel Ltd. v. Mollenkopf (1978), 1 CCEL 95
(Ont. CA) at 98. See also Gillespie v. Ontario Motor League
Toronto Club (1980), 4 ACWS (2d) 87 (Ont. H Ct J); and
Black v. Second Cup Ltd., 1995 CanLII 7270 (Ont. Sup Ct J).
21. See comments in Stein v. British Columbia Housing Management Commission, 1992 CanLII 4032 (BCCA).
22. Canadian Bechtel Ltd. v. Mollenkopf, supra note 20; Pullen v.
John C. Preston Ltd., supra note 14; and Longman v. Federal
Business Development Bank, 1982 CanLII 543 (BCSC).
23. See, for example, Zifkin v. Axa Insurance (Canada), 1996
CanLII 10441) (Alta. QB); Murray v. Jets Hockey Ventures,
supra note 3; Robinson v. Tingley’s Ltd. (1988), 20 CCEL 263
(NBQB) (a long-service meat cutter was reassigned to the
grocery department); Herrschaft v. Vancouver Community
College (1978), 91 DLR (3d) 328 (BCSC); and Blondeau v.
Holiday Ford Sales (1980) Ltd., 2005 CanLII 8672 (Ont. CA)
(a customer service rep was reassigned to a job performing
various “menial routine tasks”). See also Dykes v. Saan
Stores Ltd., 2002 MBQB 112.
24. Mifsud v. MacMillan Bathurst Inc., 1989 CanLII 260 (Ont.
CA); Morgan v. Vitran Express Canada Inc., 2015 ONCA
293; Clarke v. Halifax Herald Ltd., 2017 NSSC 337; Farber v.
Royal Trust, supra note 1; Reber v. Lloyds Bank International
Canada, 1984 CanLII 712 (BCSC); Robinson v. H.J. Heinz
Company of Canada LP, 2018 ONSC 3424; Roberts v. Versatile Farm Equipment Company, 1987 CanLII 4764 (Sask.
QB); Newsham v. Indal Limited, 1986 ABCA 101; Ally v.
Institute of Chartered Accountants (1992), 92 CLLC 14,039
(Ont. Sup Ct J); Chandran v. National Bank of Canada,
2012 ONCA 205; and Fasenko v. Flag Chevrolet-GeoOldsmobile (1994), 5 CCEL (2d) 82 (BCSC). But see Gillis v.
Sobeys Group Inc., 2011 NSSC 443 (court ruling that the
elimination of an employee’s management job at the head
office and reassignment to a lower-paying assistant store
manager position was not a constructive dismissal).
25. Farber v. Royal Trust Co., supra note 1 at 197.
26. See, for example, Stacey v. Consolidated Foods Corp. of
Canada Ltd. (1987), 15 CCEL 113 (NSSC) (express term
allowing reassignment).
27. Holgate v. Bank of Nova Scotia, 1989 CanLII 4660
(Sask. QB) (a “very slight” demotion was not a fundamental
breach); McColm v. Perth Services Ltd., 1998 CanLII 28136
(Man. QB) (a “minor reduction” in responsibilities did not
constitute a constructive dismissal); and Longman v.
Federal Business Development Bank, supra note 22 (a
“partial diminution in the employee’s status” was not a constructive dismissal).
28. Corker v. University of BC, 1990 CanLII 748 (BCSC) at 253;
Duggan v. Cowichan Family Life Assn., 1999 CanLII 5979
(BCSC); and Mackay v. Avco Financial Services Canada
Ltd., 1996 CanLII 3752 (PE SCTD).
29. Karjanlathi v. Tamrock Canada Inc., 1993 CanLII 1536
(BCSC).
30. Smith v. Viking Helicopter Ltd., 1989 CanLII 4368 (Ont.
CA). See also Morris v. Int’l Harvester Canada Ltd. (1984),
7 CCEL 300 (Ont. H Ct J); Canadian Bechtel Ltd. v. Mollenkopf, supra note 20; and Stefanovic v. SNC Inc. (1988), 22
CCEL 82 (Ont. H Ct) (transfer from Toronto to Montreal
not a constructive dismissal).
31. Jim Pattison Industries Ltd. v. Page, 1984 CanLII 2728 (Sask.
CA); Hermann v. ManAlta. Coal Ltd. (1978), 16 AR 322
(SC); Durrant v. Westeel-Rosco Ltd., 1978 CanLII 277
(BCSC); and Stefanovic v. SNC Inc., supra note 30.
32. See, for example, Weselan v. Totten Sims Hubicki Associates
Ltd., 2001 CanLII 9431 (Ont. CA) (extra commuting time
and the cost associated with driving from home in Simcoe
to a new job in St. Catharines would result in substantial
change in conditions and therefore was a constructive dismissal); Lukings v. I.M.A.W., Region 8, [1988] OJ No. 742
(Div Ct) (the cost of housing in Calgary made the refusal to
agree to a transfer from London, Ontario, reasonable, and
the transfer was a constructive dismissal); and Antworth v.
Fabricville, 2009 NBQB 54 (a change in job requiring much
greater travel amounted to a constructive dismissal).
33. Elsegood v. Cambridge Spring Service, 2011 ONCA 831 at
para 14. Note too that the fact that employment standards
legislation permits a temporary layoff does render a layoff
permissible under the common law. But see Trites v. Renin
Corp., 2013 ONSC 2715, finding that a temporary layoff
that complies with employment standards legislation
cannot give rise to a constructive dismissal. This reasoning
has not been adopted by other judges. See also Bevilacqua
v. Gracious Living Corporation, 2016 ONSC 4127; Gent v.
Strone Inc., 2019 ONSC 155; Martellacci v. CFC/INX Ltd.,
1997 CanLII 12327 (Ont. Gen Div); Janice Wiens v. Davert
Tools Inc., 2014 CanLII 47234 (Ont. Sup Ct J) (court finds
an implied term allowing for temporary layoffs based on
the industry norm, but not “indefinite” layoffs); Chevalier v.
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216 Part II The Common Law Regime
Active Tire & Auto Centre Inc., 2012 ONSC 4309; Collins v.
Jim Pattison Industries Inc. (1995), 11 CCEL (2d) 74
(BCSC); McLean v. The Raywal Limited Partnership, 2011
ONSC 7330; Pryor v. Taylor’s Feed, 2009 NBQB 346; and
Turner v. Uniglobe Custom Travel Ltd., 2005 ABQB 513.
34. Mackay v. Avco Financial Services Canada Ltd., supra note
28; and Pierce v. Canada Trust Retailer (1986), 11 CCEL 64
(Ont. H Ct J).
35. This principle has deep roots. See, for example, Hanley v.
Pease and Partners Ltd., [1915] 1 KB 698 at 705. See also
Haldane v. Shelbar Enterprises Limited, 1999 CanLII 9248
(Ont. CA); and Carscallen v. FRI Corp., 2006 CanLII 31723
(Ont. CA).
36. Kellas v. CIP Inc., 1990 CanLII 412 (BCSC).
37. Cabiakman v. Industrial Alliance Life Insurance Co., 2004
SCC 55; Potter, supra note 1.
38. Filice v. Complex Services Inc., 2018 ONCA 625 (court notes
that while it is possible that an administrative suspension
without pay pending the outcome of an investigation into
wrongdoing could be justified, that would be
“exceptional”).
39. Potter, supra note 1.
40. Morgan v. Chukal Enterprises Ltd., 2000 BCSC 1163;
Saunders v. Chateau Des Charmes Wines Ltd., 2002 CanLII
5114 (Ont. Sup Ct J); Stamos v. Annuity Research &
Marketing Service Ltd., 2002 CanLII 49618 (Ont. Sup Ct J);
Ulmer Chevrolet Oldsmobile Cadillac Ltd. v.
Kowerchuk, 2005 SKPC 18; Lamb v. Gibbs Gage Architects,
2011 ABPC 315; Hanni v. Western Road Rail Systems
(1991) Inc., 2002 BCSC 402; Vandooyeweert v. Jensten
Foods Ltd., 2002 BCPC 422; Prabhakaran v. Town of Fort
Macleod, 2010 ABPC 35; Rothberger v. Concord Excavating
& Contracting Ltd., 2015 BCSC 729; Sweeting v. Mok, 2015
ONSC 4154; and Colistro v. Tbaytel, supra note 8. In Colwell
v. Cornerstone Properties Inc., 2008 CanLII 66139
(Ont. Sup Ct J), the court described the implied term as a
mutual duty to “treat the other in good faith and fairly”
(the installation of hidden cameras in a manager’s office
was a constructive dismissal). In Boucher v. Wal-Mart
Canada Corp., 2014 ONCA 419, the court dealt with
harassment of a female employee. It found a constructive
dismissal based on a breach of an implied term requiring
“good faith and fair dealing.”
41. Potter, supra note 1; Shah v. Xerox Canada Ltd.,
supra note 8. See also Whiting v. Winnipeg River
Brokenhead Community Futures Development Corp., supra
note 8.
42. Danielisz v. Hercules Forwarding Inc., 2012 BCSC 1155;
and Baraty v. Wellons Canada Corp., 2019 BCSC 33.
43. Lloyd v. Imperial Parking Ltd., 1996 CanLII 10543 (Alta.
QB).
44. Gunton v. Richmond-upon-Thames London Borough
Council, [1981] 1 Ch. 488 (CA).
45. See comments in Belton v. Liberty Insurance Co. of Canada,
2004 CanLII 6668 (Ont. CA) at para 25.
46. See, for example, Russo v. Kerr, 2010 ONSC 6053; Hill v.
Peter Gorman Ltd., 1957 CanLII 393 (Ont. CA); and
Wronko v. Western Inventory Service Ltd., 2008 ONCA 327.
47. Farquhar v. Butler Brothers Supplies Ltd., supra note 5.
48. Polo v. Calgary (City), 1994 ABCA 359.
49. See, for example, Campbell v. MacMillan Bloedel Limited,
1978 CanLII 2602 (BCSC) (the employee could quit two
months after the employer’s breach); Pathak v. Jannock Steel
Fabricating Company, supra note 16 (a three-month delay
was not condonation); Kussmann v. AT & T Capital, 2000
BCSC 268 (a two-month delay was not condonation); and
Streight v. Dean, 2002 BCSC 399 (a two-month delay was
not condonation). Contrast these decisions to Wedding v.
Motorola Canada Limited, 1999 BCCA 752 (an 11-month
delay before quitting amounts to condonation); and Anstey
v. Fednav Offshore Inc. (1990), 34 FTR 190 (TD) (a two-year
wait under changed terms amounted to condonation).
50. Belton v. Liberty Insurance Co. of Canada, supra note 45 at
para 26.
51. Tilbe v. Richmond Realty Ltd., 1995 CanLII 738 (BCSC).
52. See Russo v. Kerr, supra note 46.
53. Wronko v. Western Inventory Service Ltd., supra note 46. In
Russo v. Kerr, supra note 46, the employee’s lawyer had
written to the employer advising that the employee’s position was that the unilateral pay cut was a constructive dismissal. The court relied on this letter as the evidence to
prove that the pay cut had been “accepted” as a constructive
dismissal by the employee notwithstanding the employee’s
continuation in the job. However, in that case the employee
claimed and the court accepted that when the employee
continued to work after objecting to the pay cut, he was in
fact mitigating his loss. This is explained in Chapter 14
when we consider the duty to mitigate damages in wrongful
dismissal cases.
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C H A P T E R 14
Damages in Wrongful Dismissal
Lawsuits
LEARNING OBJECTIVES
CHAPTER OUTLINE
After reading this chapter, students will be able to:
I. Introduction 217
II. General Theory of Damages and Absence of “Specific Performance” 217
III. Categories of Damages in Wrongful Dismissal Lawsuits 219
A. Compensatory (or Ordinary) Damages 219
B. Aggravated Damages for Bad Faith in the Manner of Dismissal 222
C. Punitive Damages 225
IV. The Duty to Mitigate Compensatory Damages 226
A. The Standard of Mitigation Required 227
B. Mitigation with a Job Offered by the Former Employer 227
V. Chapter Summary 229
Questions and Issues for Discussion 230
Exercise 230
Notes and References 231
• Describe the three categories of damages that can be awarded
in wrongful dismissal lawsuits.
• Explain the legal tests applied by the courts to determine which
(if any) category of damages applies in a wrongful dismissal
lawsuit.
• Define specific performance and how it is applicable to wrongful
dismissal lawsuits.
• Describe how an employee’s “duty to mitigate” affects wrongful
dismissal damages.
I. Introduction
If an employee wins a “wrongful dismissal” lawsuit, what do they win? The key to answering this
question is to remember what the employer did wrong: it breached the term in the employment
contract requiring it to provide the employee with notice of termination. It was not the termination itself that was illegal, since the employer can dismiss an employee by providing notice unless
the contract states otherwise. Therefore, the courts ask what loss the employee suffered as a consequence of not receiving notice, and then order the employer to pay damages (money) to the
employee to compensate for that loss. This chapter explains how the courts approach that task.
II. General Theory of Damages and Absence of
“Specific Performance”
When an employer dismisses an employee without giving proper notice (and absent cause for
summary dismissal), this action repudiates the contract and the contract comes to an end.1 The
employee can then sue the employer for wrongful dismissal to recover damages incurred as a
result of the employer’s failure to provide proper notice.2 The Supreme Court of Canada has
damages: An amount of money a party guilty of a contract or tort violation is ordered to pay the innocent party to compensate
the person for the harm incurred.
repudiation of contract: A breach of contract that demonstrates an intention by the party to treat the contract as at an end
and to no longer be bound by the contract.
wrongful dismissal: A type of lawsuit by an employee against a former employer alleging that the employer terminated their
contract without complying with the implied term in the contract requiring “reasonable notice.”
217
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218 Part II The Common Law Regime
explained that damages for breach of contract should “as far as money can do it, place [the
innocent party] in the same position as if the contract had been performed.”3 Therefore, in a
wrongful dismissal lawsuit, the courts assess what money and benefits employees would have
received had they worked the notice period.
Imagine that Jacqueline’s contract entitled her to three months’ notice of termination, but she
is dismissed without notice. What has Jacqueline lost by being dismissed without that notice?
Well, she has lost the opportunity to physically perform work for the employer for those three
months. Her lawsuit will not likely come before a judge until those three months have long
passed. However, in theory, the judge could order the employer to rehire Jacqueline for an additional three months to put her back into the position she would have been in had the contract
been complied with. A court order requiring someone to perform their obligations under a
contract is known as specific performance. In the context of wrongful termination of an employment contract, this remedy would mean that either the employer must re-employ a dismissed
employee or the employee who quit in a manner that breached the contract must return to work.
However, the courts do not, except in very rare circumstances,4 order specific performance
of an employment contract.5 If one of the parties to the employment contract wants the employment relationship to end, then the common law courts have reasoned that it makes little sense
to order it to continue. Justice Lambert of the British Columbia Court of Appeal captured this
sentiment:
It is not consistent with our respect for human dignity and freedom of choice to enforce an employment relationship against the wishes of one of the parties.6
The inability to obtain specific performance of an employment contract means that dismissed employees who win wrongful dismissal lawsuits will not get their job back.7 Their job is
gone, unless the employer voluntarily decides to offer a new employment contract. We should
pause here to note that the notion that forcing an employment relationship to continue against
the wishes of one party is inconsistent with human dignity and freedom is not universally
applied throughout the law of work. For one thing, as we will see later in this chapter, the common law courts have not applied this same logic when the situation is flipped: the courts do
expect employees to return to work against their wishes in the context of the “duty to mitigate.”
Also, as we will learn in Parts III and IV of the text and as summarized in Box 14.1, in both the
regulatory and collective bargaining regimes, expert administrative tribunals regularly reinstate
employees against the wishes of employers.
BOX 14.1 » TALKING WORK LAW
Reinstatement of Dismissed Employees Under the Three Regimes of Work Law
In the common law regime, judges do not, except in rare circumstances, order the reinstatement of employees who
have been dismissed without notice (wrongfully dismissed).
Even if an employer fires an employee for theft but it turns
out that no theft occurred, all that the employee will be
awarded is damages of the sort discussed in this chapter.
This approach stands in sharp contrast to that of the other
two regimes of work law considered in this text: in the regu-
latory standards regime and the collective bargaining regime, employees can be reinstated when they are dismissed
improperly.
In the regulatory standards regime, employers are restricted
from dismissing employees for certain reasons. For example,
human rights legislation prohibits dismissal of an employee
for reasons related to prohibited grounds of discrimination,
such as race, gender, and religion. Other employment-related
specific performance: An order by a court requiring a party found to have breached a contract to carry out its obligations
as specified in the contract.
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Chapter 14 Damages in Wrongful Dismissal Lawsuits 219
legislation, such as employment standards and occupational
health and safety legislation, prohibits dismissal of employees
who attempt to enforce their statutory rights (anti-reprisal
laws). The remedy for dismissals that violate protective employment legislation can include reinstatement of the employee to their former job. In a few Canadian jurisdictions
(federal, Nova Scotia, and Quebec), non-union employees who
have been dismissed have access to a statutory unfair dismissal
process that can lead an adjudicator to reinstate them to their
jobs.* We will consider these statutory rules in Chapter 20 in
Part III.
In the collective bargaining regime, unions bargain clauses
into collective agreements that prohibit employers from dismissing employees without “just cause.”† No right exists to
dismiss a unionized employee without cause simply by giving
notice, as is the case for non-union employees in the common
law regime. In labour arbitration, the forum that decides collective agreement disputes, the presumption is that reinstatement is the appropriate remedy in cases of “unjust dismissal”
of a unionized employee. The availability of reinstatement for
improper dismissal of an employee is one of the key features
that distinguishes the common law from the collective bargaining regime. We will learn about this law in Part IV.
The use of varying approaches to reinstatement as a remedy in employment termination cases creates a mishmash of
rights and remedies for Canadian employees that depends on
(1) where and for whom the employee works, and (2) the
reason for the termination. Only in the common law regime is
the remedy for termination of an employment contract restricted to monetary damages.
* See the discussion of these statutory unfair dismissal schemes in
G. England, Individual Employment Law, 2nd ed (Toronto: Irwin Law,
2008) at 364-92.
† See D. Brown & D. Beatty, Canadian Labour Arbitration, 4th ed (Aurora,
ON: Canada Law Book, 2006) at chapter 7. See the discussion of the
origins of the arbitral presumption that reinstatement is the
appropriate remedy in unjust dismissal cases in the unionized setting in
M. Mitchnick & B. Etherington, Labour Arbitration in Canada (Toronto:
Lancaster House, 2006) at 118-19.
III. Categories of Damages in Wrongful Dismissal Lawsuits
Three general categories of damages are available to employees in wrongful dismissal lawsuits:
1. Compensatory damages (sometimes called “ordinary” damages).
2. Aggravated or “moral” damages for bad faith in the manner of dismissal.
3. Punitive damages.
Each serves a distinct purpose. The first two compensate employees for harms suffered as a
result of the employer’s wrongful behaviour. Punitive damages, on the other hand, serve the
broader purpose of retribution, deterrence, and denunciation in cases where employers have
behaved so reprehensibly that the courts believe punishment is necessary. A summary of these
three “heads of damage” (categories of damages) appears in Table 14.1.
A. Compensatory (or Ordinary) Damages
The financial losses that flow naturally from the fact that the employee was not permitted to
work the notice period are known as compensatory damages. The courts determine the proper
length of notice by applying the Bardal factors we discussed in Chapter 10, and then calculate
what payments and benefits the employee would have received had they worked through that
period.8 The British Columbia Court of Appeal nicely summarized the approach of Canadian
courts:
If the employer terminates the employment contract without just cause and without giving reasonable notice of termination, the employee is considered to have been wrongfully dismissed and is
entitled to damages equal to the employee’s salary and benefits that would have accrued during the
period of notice that should have been given by the employer.9
compensatory damages: Damages that compensate the innocent party for the direct loss of benefits they would have earned
had the contract not been violated by the guilty party.
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220 Part II The Common Law Regime
TABLE 14.1
Damages in Wrongful Dismissal Cases
Category of Damages
Basis for Recovery
Test for Recovery
Compensatory damages*
The employee lost contractual benefits
that would have been received had they
worked through the notice period,
including wages and other benefits.
What losses would reasonably have been contemplated by the
parties had they considered what the employee would lose if the
employer terminated the contract without giving proper notice?
Aggravated or “moral”
damages for bad faith in
the manner of dismissal
The employee experienced mental pain
and suffering or hurt feelings as a result
of harsh, insensitive, or dishonest
behaviour by the employer in the
manner in which the employee’s
contract was terminated.
Since Wallace v. United Grain Growers Ltd. (1997), the courts assume
that the parties contemplated that employees will suffer mental
pain and suffering if terminated in a harsh, insensitive, or dishonest
manner. However, the employee must demonstrate that real
physical or psychological harm occurred and that harm was caused
by the manner of dismissal (as opposed to the dismissal itself ).
Punitive damages
The employer’s behaviour was so reprehensible and outrageous that the law
should punish the employer beyond the
mere ordering of compensatory and
aggravated damages. The goal is to
advance the objectives of “denunciation, deterrence, and retribution.”
Leading case: Hadley v. Baxendale (1854)
Leading case: Honda Canada Inc. v. Keays (2008)
The employer’s outrageous behaviour must amount to an
“independent actionable wrong” beyond the breach of the notice
of termination clause. Often this independent wrong will be breach
of an expressed or implied term of the contract requiring the
employer to treat the employee with decency and in good faith.
The court must also find that the goals of “denunciation, deterrence, and retribution” are not sufficiently addressed by other
damages.
Leading case: Honda Canada Inc. v. Keays (2008)
* Subject to the employee’s “duty to mitigate.”
In assessing compensatory damages, judges apply the reasonable contemplation test originally developed in 1854 in the famous case of Hadley v. Baxendale.10 The rule is that damages are
recoverable for a breach of contract to the extent that the parties would reasonably have contemplated that the damages would result if, at the time the contract was formed, they had considered
what harms the employee would suffer if dismissed without notice.
Consider a silly example. If an employee who has just been dismissed without notice finds
himself suddenly with time on his hands and goes golfing, during which his leg is bitten off by
an alligator hiding in a sand trap, he cannot recover damages for the lost leg from the employer
in a wrongful dismissal lawsuit. Although he would not have been golfing that day “but for”
his sudden and wrongful dismissal, neither party would reasonably have contemplated an alligator attack in the event that the employer dismissed the employee without notice. We call
damages that could not have been reasonably contemplated by the parties too “remote” to be
recoverable.11
Some losses arising from a failure of the employer to give proper notice to the employee are
easily contemplated. Obviously, an employee dismissed without notice will lose out on the wages
and other benefits that would have been earned had they worked the notice period. Provided
that the employee can prove they suffered those losses, damages would be awarded to compensate the employee—to put the employee back into the financial position they would have been
in had they worked the notice period.12 Lost wages for the notice period are usually easy to
reasonable contemplation test: The test of contract damage “remoteness” from the 1854 case of Hadley v. Baxendale. It
provides that damages for breach of contract are available only for harms that the parties would reasonably have contemplated
at the time the contract was formed.
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Chapter 14 Damages in Wrongful Dismissal Lawsuits 221
calculate. If the evidence establishes that the employee would have received a raise or worked
overtime at an additional rate of pay during the notice period, then those amounts will also be
included in the calculation of lost wages.13
An employee may also have been entitled to payments or benefits other than wages during
the notice period. For example, the value of pension contributions or pension benefits that
would have been earned or accrued during the notice period is usually recoverable.14 So would
the value of other benefits the employee would have received during the notice period, such as
vacation pay or vacation time;15 a car allowance, provided that the benefit was a component of
the employee’s compensation and not simply a reimbursement of actual expenses incurred in
the course of working;16 and the value of stock options that the employee would have been entitled to exercise within the notice period.17
If the employer cancelled health, dental, and life insurance benefits coverage during the
notice period, the lost value of those benefits is recoverable in a successful wrongful dismissal
case. Cancelling a dismissed employee’s benefits before the notice period expires could prove
costly for an employer. For example, if an employee becomes disabled during the notice period,
but disability insurance benefits have been cut off, the employer will be liable for the amounts
the employee would have received from the insurance company.18 Similarly, if a dismissed employee pays out of pocket for dental visits or other medical costs that would have been covered
by the employer’s benefits plan, the employer would be ordered to reimburse the employee for
such costs. A dismissed employee with employer-provided dental benefits should rush to the
dentist and get all that expensive work done before the notice period expires!19
If a payment such as a commission or bonus was payable at the discretion of the employer,
or the evidence establishes that the employee would not have qualified for such a payment even
if they had worked through the notice period, then it likely will not be ordered by a court in the
damage award.20 However, if the contract language or the facts confirm that the employee would
have received the commission or bonus had they worked the notice period, then that loss will
also be included in the damage award.21 Box 14.2 examines the relationship with the assessment
of reasonable notice and damages for lost benefits.
BOX 14.2 » CASE LAW HIGHLIGHT
Damages for Benefits That Would Have Vested During the Notice Period
Gillies v. Goldman Sachs Canada Inc.
2001 BCCA 683
Key Facts: Gillies was dismissed on April 30, 1998, from
his job as a securities salesman for Goldman Sachs Canada
Inc. with just under five years’ service. He had been paid by
a combination of salary and an annual bonus. In May 1999,
the company submitted an initial public offering (IPO) to take
the company public. Any employee employed as of March
1999 and still employed on May 3, 1999, was entitled to receive stocks in the new company. The lower court fixed the
period of reasonable notice at 12 months. Since that period
ended three days prior to May 3, 1999, the court ruled that
Gillies would not have qualified for the IPO shares. Gillies
appealed.
Issue: Did the trial judge make an error in fixing the period of
reasonable notice at 12 months, thereby leaving Gillies outside
the vesting date of the IPO shares?
Decision: Yes. The court of appeal explained that if Gillies
would have satisfied the qualifying conditions had he worked
out the notice period, then he would be entitled to the value
of the IPO shares. To qualify, the notice period would need to
continue until at least May 3, 1999, the date of vesting for
Goldman Sachs employees. The court of appeal found that 12
months’ notice was “on the low end,” considering the Bardal
factors we learned about in Chapter 10. Moreover, the fact that
12 months left Gillies just three days short from qualifying for
the IPO shares served an injustice. The court of appeal extended the notice period to 13 months, with the result that
Gillies qualified for the IPO shares. The calculation of damages
was sent back to the trial judge to decide.
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222 Part II The Common Law Regime
In short, calculating general damages arising from a wrongful dismissal requires identification of what the employee has lost by not working through the entire notice period, and then an
assessment of the financial cost of that loss.
B. Aggravated Damages for Bad Faith in the Manner of Dismissal
The Supreme Court of Canada has recognized that being fired is a stressful event, and that sudden job loss can negatively impact the employee’s self-esteem, confidence, and personal dignity.22 Dismissed workers often suffer distress, hurt feelings, and psychological harm (including
anxiety and depression) as a result of the termination, harm that is not easily quantifiable.
Should an employee be able to recover money from the employer for these harms, in addition
to the compensatory damages they suffered from the failure of the employer to give proper
notice?
Historically, the courts said that they should not. The general rule was that an employee
cannot recover damages for the hurt feelings or mental pain and suffering—known as aggravated
damages—they experience as a result of being terminated.23 Since the parties agreed that the
contract could be terminated with notice, the possibility of the employee losing their job was
anticipated. Therefore, damages for hurt feelings arising from that inevitability were not recoverable. However, the courts’ approach has evolved in recent years.
In 1997, the Supreme Court decided in the case of Wallace v. United Grain Growers Ltd. that
damages for mental suffering or hurt feelings could be awarded to a dismissed employee if the
employer engages in “bad faith in the manner of dismissal.”24 The court ruled that an employer
should be “candid, reasonable, honest and forthright” with employees in the manner in which
they terminate the employment contract.25 A failure to meet this standard would be treated as
bad-faith discharge. Damages for bad-faith discharge would be awarded by extending the
period of reasonable notice. For example, an employee who would otherwise be entitled to eight
months’ reasonable notice, applying the Bardal factors we discussed in Chapter 10, might be
awarded ten months’ notice if the court ruled that the manner in which the employee was dismissed was in bad faith. Bad faith in the manner of dismissal became a new factor, added to the
Bardal factors, that judges consider in assessing the period of reasonable notice.
In the years that followed Wallace, many employees included claims for “Wallace damages”
in their wrongful dismissal lawsuits. In dozens of cases, judges extended the notice periods
when they felt employers were unduly insensitive in the manner in which they dismissed
employees.26 When Wallace damages were ordered, they tended to be in the range of an additional one to four months added to the period of reasonable notice.27 Wallace damages became
common in the years following the release of the decision—so much so that judges began to
question whether the Wallace approach to aggravated damages was working.28 When the issue
of damages for bad faith in the manner of dismissal again came before the Supreme Court a
decade after the Wallace decision in the 2008 case of Honda Canada Inc. v. Keays, the Supreme
Court altered its approach, as Box 14.3 explains.29
aggravated damages: Damages awarded to the innocent party that compensate for mental or psychological pain and suffering caused by the guilty party’s wrongful act.
bad-faith discharge: When an employer dismisses an employee in a manner that is dishonest, harsh, or insensitive to the
feelings and vulnerability of the employee.
Wallace damages: A phrase commonly used in wrongful dismissal decisions in Canada to describe damages ordered against
an employer for acting in bad faith in the manner in which it terminated an employment contract. Wallace v. United Grain Growers
Ltd. (1997) was the Supreme Court of Canada decision in which these damages were first ordered.
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Chapter 14 Damages in Wrongful Dismissal Lawsuits 223
BOX 14.3 » CASE LAW HIGHLIGHT
Damages for Bad-Faith Discharge
Honda Canada Inc. v. Keays
2008 SCC 39
Key Facts: Keays had been employed by Honda Canada Inc.
for 11 years when he became ill. The employer requested
medical letters explaining his absences, but was unsatisfied
with the letters prepared by Keays’s doctor. Therefore, the
employer demanded that Keays be evaluated by a doctor
chosen by the employer. Keays refused to see the employer’s
doctor unless the employer first explained the purpose and
methodology that would be used by the doctor. In response,
Honda terminated Keays for cause (summary dismissal; see
Chapter 12) for refusing the employer’s request. Keays sued
for wrongful dismissal, seeking compensatory damages for
failure to provide reasonable notice, as well as aggravated and
punitive damages.
Issue: Was Keays wrongfully dismissed? If yes, what were his
damages?
Decision: Yes, Keays was wrongfully dismissed. His refusal to
see the employer’s doctor was not cause for summary dismissal. Given Keays’s history of being misdiagnosed in the
past, he had a reasonable excuse to refuse a one-on-one
appointment with the employer’s doctor in the circumstances and, in any event, terminating Keays for expressing
reservations about the medical referral was not proportional
to any misconduct Keays may have engaged in. The Supreme
Court of Canada accepted the trial judge’s conclusion that 15
months was reasonable notice in his case. Therefore, Keays
was entitled to compensatory damages based on 15 months’
notice.
On the question of aggravated damages arising from the
manner in which Keays was dismissed, the Supreme Court
reconsidered its earlier Wallace approach. While damages are
still recoverable for bad faith in the manner of dismissal, those
damages will no longer be assessed simply by extending the
period of reasonable notice. Instead, such damages would be
assessed according to the general rule we learned about
earlier in this chapter, from Hadley v. Baxendale. That case
found that contract damages are only recoverable if they were
within the “reasonable contemplation” of the parties when
the contract was formed. According to the Supreme Court,
since the Wallace decision “there has been [an] expectation
by both parties … that employers will act in good faith in the
manner of dismissal. Failure to do so can lead to foreseeable,
compensable damages.”
Therefore, an employee can recover aggravated damages for bad faith in the manner of dismissal if the court is
persuaded that the harsh manner of dismissal, rather than
the fact that the employee was dismissed, actually caused
the employee real physical or psychological harm. If so, the
courts must assign a dollar amount to that harm. In this
case, the Supreme Court ruled that the employer 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 requested independent medical evidence. Therefore, Keays was not entitled to aggravated or
punitive damages.
There are now dozens of Canadian wrongful dismissal decisions in which courts have
ordered aggravated damages for bad faith in the manner of dismissal. The sorts of employer
behaviour that courts have found to constitute bad-faith discharge include the following:
• Being dishonest about the reason for dismissal.30
• Making unwarranted attacks on the employee’s job performance or honesty, such as by
falsely accusing the employee of misconduct.31
• Communicating the termination in an insensitive manner.32
• Handling the complaint in a procedurally unfair manner, such as by refusing the employee an opportunity to explain alleged wrongful acts.33
• Refusing to pay statutory benefits, to file documents necessary to permit the employee
to access government benefits, or to provide a reference letter.34
• Harassing the employee.35
• Threatening the employee with a large counter lawsuit if the employee dares to file a
wrongful dismissal lawsuit, or needlessly dragging out the litigation to impose further
costs on the employee.36
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224 Part II The Common Law Regime
It is more difficult for an employee to obtain aggravated damages for bad-faith discharge
under the Honda approach than it was under the Wallace approach.37 Under Wallace, the employee was not required to prove that they suffered actual physical harm as a result of the manner in which the dismissal took place. The employee had only to present evidence that the
employer acted in an unduly insensitive manner when it fired the employee, and if the judge
agreed, the judge would extend the notice period and therefore the amount of damages owed.38
Under the Honda approach, the employee must now present some evidence that establishes that
they suffered physical or psychological harm caused by the employer’s insensitive behaviour
rather than the fact of being dismissed.39 That causal connection is often difficult to establish.40
However, if the employee can persuade the court that they suffered serious psychological or
physical harm as a result of the manner of dismissal, the recoverable damages can be larger than
under the Wallace approach.41 That is because in the Honda approach, the court will not simply
extend the notice period by a month or two but instead compensate the employee for the actual
harm suffered. For example, if the employee cannot work due to depression caused by the
employer’s bad faith in the manner of dismissal, then the employer could be liable for lost wages
damages going far beyond the notice period under the former contract.42 In the 2019 decision
Colistro v. Tbaytel (see Box 13.1), the Ontario Court of Appeal awarded $100,000 in “Honda
aggravated damages” for mental suffering experienced by a female employee who was constructively dismissed when the employer rehired a man who years earlier had sexually harassed her.
The court ruled that the employer had “placed its business interests above the expectations and
concerns of a valued, long-time employee” and downplayed the psychological trauma the hiring
caused the employee.43 In the decision summarized in Box 14.4, the same court ordered
$200,000 in aggravated damages for Walmart Canada’s behaviour leading to a constructive dismissal, along with an additional $100,000 in punitive damages.
BOX 14.4 » CASE LAW HIGHLIGHT
Aggravated and Punitive Damages for Failing to Stop Managerial Harassment of an Employee
Boucher v. Wal-Mart Canada Corp.
2014 ONCA 419
Key Facts: Boucher was an assistant manager. After she refused
her manager’s order to falsify a temperature log, the manager
(Pinnock) commenced a six-month campaign of verbal harassment and intimidation directed at Boucher. Boucher complained to upper management, which only increased the
intensity of Pinnock’s abuse. Pinnock routinely swore at Boucher, called her stupid in front of colleagues, and attempted to
drive Boucher to quit. A human resources manager told Pinnock
to back off on his treatment of Boucher, but Pinnock responded,
“not until she [f-ing] quits.” Nevertheless, after an “investigation,” management told Boucher that her “complaints were
unsubstantiated,” and they warned her to stop undermining
Pinnock. Boucher quit and sued for constructive dismissal. She
received medical treatment for abdominal pain and bloating,
which a doctor attributed to stress. Walmart continued to pay
Boucher’s salary and benefits for eight months (even though her
contract entitled her to only 20 weeks’ notice of termination).
A jury awarded punitive damages against Pinnock in the
amount of $150,000 as well as another $100,000 for committing the tort of intentional infliction of mental suffering.
Walmart was vicariously liable for these damages (meaning
Walmart is required to pay the damages ordered against Pinnock) because Pinnock was its employee at the time. (We will
discuss this tort and the concept of vicarious liability in Chapter 16). The jury ordered $200,000 in aggravated damages
against Walmart plus an additional $1,000,000 in punitive
damages. Both Pinnock and Walmart appealed those orders.
Issue: Did the jury make an error in awarding large aggravated
and punitive damages against Pinnock (the manager) and
Walmart?
vicarious liability: A legal rule under which an employer is liable for damage caused to a third party by one or more of its
employees.
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Chapter 14 Damages in Wrongful Dismissal Lawsuits 225
Decision: The court of appeal upheld the tort award against
Pinnock but reduced the punitive damages award against him
from $100,000 to $10,000. The court ruled that Pinnock’s behaviour was a “marked departure from the ordinary standards
of decent human behaviour” and therefore warranted a punitive damages order. However, when combined with the
$150,000 tort award, the jury’s punitive damages award was
excessive to serve the function of punishment and deterrence.
The court found that $10,000 punitive damages combined
with $150,000 tort damages award was more than sufficient
against an individual person.
The court of appeal upheld the aggravated damages award
of $200,000 against Walmart. The court ruled that the constructive dismissal occurred as a result of Walmart’s complete
failure to take Boucher’s complaints about Pinnock seriously.
Not only did Walmart not ensure the harassment stopped, it
effectively took Pinnock’s side by threatening Boucher that
complaints against Pinnock would lead to her discipline.
Walmart’s behaviour left Boucher with no choice but to quit,
and this constitutes bad faith in the manner of dismissal. The
court of appeal reduced the punitive damages award from
$1,000,000 to $100,000. It found that Walmart had committed
a separate legal wrong, as required to award punitive damages,
by breaching the “implied duty of good faith and fair dealing”
in employment contracts. However, the amount of $1 million
was unnecessarily high and not rationally connected to the
objective of deterrence and denunciation given that Walmart
was already liable to pay $200,000 in aggravated damages plus
the $100,000 tort damages ordered against Pinnock, plus
Boucher’s legal expenses in the trial.
C. Punitive Damages
The final type of damages potentially available in wrongful dismissal cases is known as punitive
damages. These damages are not intended to compensate the employee for actual harm suffered
(like compensatory and aggravated damages). Rather, they are intended to punish the employer
for its reprehensible conduct. The Supreme Court of Canada has described punitive damages
this way: “punitive damages are restricted to … wrongful acts that are so malicious and outrageous that they are deserving of punishment on their own.”44 The goals of punitive damages are
“denunciation, deterrence and retribution,” and they are only awarded when the court believes
that other damages will not satisfy those goals.45 To obtain punitive damages in a wrongful
dismissal lawsuit, the employee must point to an “independent actionable wrong,” such as a tort
or breach of a contract term other than the term requiring notice of termination.46 For this
reason, implied terms requiring “fair dealing” or decent treatment of employees play an especially important role in the assessment of punitive damages.
The very high legal threshold for ordering punitive damages means that they are ordered
relatively infrequently. However, in recent years, Canadian courts have been more willing to
order large punitive damage awards against employers who act in a manner that the courts believe is high-handed and insensitive to the employee. The Walmart case in Box 14.4 is one example.47 In a second more recent case, Galea v. Wal-Mart Canada, Walmart was again ordered
to pay $200,000 in aggravated damages plus a whopping $500,000 in punitive damages! In that
case, Walmart demoted a vice-president to a lower-ranking executive job but refused to define
her new position or assign a clear role for 10 months before they eventually terminated her.
After the employee was terminated, Walmart failed to abide by the clear contract language
requiring payment of wages for two years and then used delay tactics to stall the litigation. The
lower court ruled that Walmart’s conduct violated the implied duty of good-faith dealing in a
high-handed manner.48 In the 2018 decision Bailey v. Service Corporation, a British Columbia
court ordered $110,000 in punitive damages against an employer that terminated a long-serving, 60-year-old employee when he was off work sick. The employee found out he had been
terminated when his wife was told by an insurance company. The employer then falsely maintained that the employee had been terminated for cause.49
punitive damages: Damages ordered against a party who engages in outrageous or egregious behaviour deserving of special
denunciation and retribution.
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226 Part II The Common Law Regime
IV. The Duty to Mitigate Compensatory Damages
Finally, we need to consider the duty of employees to mitigate avoidable losses when they have
been dismissed. This task requires that we distinguish between two types of contractual promises dealing with termination found in employment contracts. The first is a promise by the employer to pay the employee a predetermined amount of money at the time of termination, such
as the following:
The employer shall provide the employee with three months’ notice of termination or pay in lieu of
notice.
This clause creates a binding obligation on the employer to either give the employee three
months’ working notice or pay the employee three months’ wages when it terminates the contract. In either case, the employer has promised to pay the employee three months’ pay if and
when it terminates the contract.50 When a contract spells out a specific amount of notice or pay
in lieu of notice to which an employee is entitled as a condition of termination, the employee is
under no obligation to try and reduce their losses unless the contract includes an expressed term
requiring the employee to do so. So even if the employee immediately gets a new job, the previous employer still has to pay the full three months’ pay despite the fact that this means the employee receives somewhat of a windfall. This result applies as well in the case of a fixed-term
contract that is terminated early by the employer. The employee could sit on the couch and
watch The Simpsons reruns and still collect the pay required by the contract.51
The second type of clause does not define a specific amount of notice or pay in lieu of notice
that is required but instead requires the employer to provide the employee with reasonable
notice of termination. As we have seen, a failure of the employer to comply with the contractual
obligation to give reasonable notice “repudiates” the contract and entitles the employee to
recover damages for wrongful dismissal. A promise to give reasonable notice is not the same
thing as a promise to pay three months’ wages as a condition of termination. The importance
of the distinction rests in a rule of contract law that requires the innocent party to minimize
their losses. This rule is known as the duty to mitigate. It requires an employee dismissed
without reasonable notice to do their best to limit the damages incurred from not having
received reasonable notice. Consider the following example:
A court rules that Stephen’s contract required the employer to provide three months’ reasonable
notice of termination. The employer dismissed him with no notice. Stephen’s wages amounted to
$2,000 per month. After one month of unemployment, Stephen got a new job that paid him $1,500
per month. His damage award in the wrongful dismissal lawsuit would be calculated as follows:
Lost wages arising from wrongful dismissal (3 months’ pay at $2,000/mo.)
$6,000
Deduct earnings from new employment (2 months’ pay at $1,500/mo.)
$3,000
Total amount of damages employer must pay
$3,000
The employer benefits from the employee’s successful mitigation efforts in this example.
Moreover, if Stephen had just sat on the couch watching television and had not searched for a
new job, the court could also deduct from the damages owing whatever amount the court thinks
Stephen would have earned had he made reasonable efforts to find a job. Therefore, in a lot of
wrongful dismissal lawsuits, the courts are asked to decide whether the employee has satisfied
the duty to mitigate.
duty to mitigate: A legal obligation on the victim of a breach of contract by the other party to make reasonable efforts to
limit the amount of damages suffered as a consequence of the breach.
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Chapter 14 Damages in Wrongful Dismissal Lawsuits 227
A. The Standard of Mitigation Required
The burden is on the employer to persuade the court that the employee could have mitigated
their losses but failed to do so.52 That means demonstrating that the employee did not make
reasonable efforts to seek new employment and also that, if the employee had done so, they
probably would have gotten a new job.53 In practice, therefore, the duty to mitigate usually boils
down to two key obligations imposed on the dismissed employee:
1. To make reasonable efforts to look for a new job.
2. To accept a job offer that a reasonable person in their position would accept (including,
as we will see, a job offer from the very employer who has just fired the person!).
Employers will present evidence that job vacancies were available during the notice period
for which the employee was reasonably qualified (e.g., through ads posted on job boards or in
newspapers). Employees are usually given a brief period—one court said up to two to three
months—of recovery time immediately after dismissal during which time they are not expected
to be actively looking for work.54 Thereafter, employees are expected to take reasonable steps to
mitigate the damage resulting from the wrongful dismissal.
An employee is not required to accept any job that comes up. The legal test asks whether the
employee acted “reasonably” in their efforts to find new work, as described by the British Columbia Court of Appeal:
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 his industry, trade or profession. The question 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 lower-paying alternate employment with doubtful prospects.55
It is difficult to describe concrete rules that apply to mitigation, since each case is decided on
its own unique facts. However, a perusal of the many cases considering mitigation allows for
some general statements. For example, in applying the “reasonableness” test, the courts have
ruled that employees can decline job opportunities that would amount to a substantial step
backward from their previous job, including much lower pay and status.56 Also, employees are
not required to apply for jobs they are clearly not qualified for57 or to accept a part-time job
rather than hold out for a full-time position.58 If job opportunities in the employee’s field are
scarce, then reasonable mitigation may include returning to school or taking new training programs.59 A dismissed employee may be required to accept a job in a different geographical location if no local jobs are available; however, the extent to which an employee is required to uproot
and move depends on the employee’s age and personal circumstances.60
In one case, an employee was considered to have failed to mitigate when he declined a job
offer in the same field as his former job to pursue a new career as a self-employed real estate
agent, a decision the court believed was too “risky.” The court ruled that it is unreasonable, and
a failure of the duty to mitigate, for an employee to pursue self-employment rather than a new
job in their field, unless the evidence discloses that the employee would not have been able to
find a job in their traditional field.61 It is also unreasonable for an employee to hold out for a job
with a specific employer when reasonable opportunities are available with other employers in
their field.62
B. Mitigation with a Job Offered by the Former Employer
A controversial issue involves the duty of an employee to mitigate with a job offered by the same
employer who has just illegally fired them. The courts have long stated that the employment
relationship is defined by mutual trust and confidence, and for this reason (among others)
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228 Part II The Common Law Regime
judges have declined to order specific performance of employment contracts, as noted earlier in
this chapter. Moreover, the courts have also recognized that employees are in a position of vulnerability. Therefore, we might think that an employee ought not to be required to accept a job
with the employer who has just illegally dismissed them, under threat of forfeiting entitlement
to damages arising from that termination. As the BC Court of Appeal once noted, it is “almost
amusing, and highly artificial” to expect that an employer will work nicely and respectfully with
an employee who is in the process of suing that employer for wrongful dismissal.63
Nevertheless, the Supreme Court of Canada ruled in the case of Evans v. Teamsters Local
Union No. 31 that the 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.” The court wrote that a reasonable person would likely accept a job offer from the former
employer when the following conditions are met:
1. The salary offered is the same, the working conditions are not substantially different or
the work demeaning, and the personal relationships are not acrimonious.
2. Returning to the old workplace would not place the employee in an “atmosphere of
hostility, embarrassment or humiliation.”64
Since Evans, employers frequently offer dismissed employees job opportunities during the
notice period in an attempt to reduce the damages payable. Some employees who refuse those
offers have been found to have failed in their duty to mitigate (see Box 14.5). In the majority of
cases, though, courts have ruled that employees were not required to accept mitigation with
their former employer on the basis that the offered job was not substantially similar or that it
would be humiliating or unreasonable to expect the employee to return to their old workplace.65
However, when the circumstances of the termination were not hostile or contentious, and the
terminated employee is offered a job of similar status and pay, courts have found that the employee was required to accept the offer of mitigation with the former employer.66
BOX 14.5 » CASE LAW HIGHLIGHT
Meet the New Boss, Same as the Old Boss
Chevalier v. Active Tire & Auto Centre Inc.
2013 ONCA 548
Issue: Did Chevalier fail to mitigate when he refused the employer’s offer to re-employ him in his former position?
Key Facts: Chevalier was 55 years old and had 33 years’ service
with Active Tire & Auto Centre Inc., including 18 years as a
manager, when a temporary layoff led to his constructive
dismissal. Chevalier filed his lawsuit a couple of weeks into the
layoff. A few days after that lawsuit was filed, the employer
offered Chevalier the opportunity to return to his old job.
Chevalier refused the offer because he felt harassed and disrespected by the employer. At the trial, the court assessed the
period of reasonable notice at 24 months. However, the employer argued that Chevalier had failed to mitigate his losses
when he declined the employer’s offer to return to work.
Decision: Yes. Applying the Supreme Court’s reasoning in
Evans v. Teamsters Local Union No. 31, the court ruled that the
employer’s job offer was at the same rate of pay and in the
identical position, and that returning to this job would not
have caused Chevalier embarrassment or humiliation. The
employer had not treated Chevalier in a demeaning manner
during the ordeal. A “reasonable person” in Chevalier’s position
would have accepted the job offer. Therefore, the employer
had met the burden of proving that Chevalier failed in his duty
to mitigate his damages. No damages were ordered, even
though the employer had wrongfully dismissed Chevalier.
The Evans approach requiring employees to sometimes mitigate in a job with the employer
who just fired them has been criticized because it allows an employer to avoid the consequences
of its wrongful actions by simply offering the dismissed employee another job. Justice Abella of
the Supreme Court noted in her dissenting judgment in Evans that the requirement to mitigate
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Chapter 14 Damages in Wrongful Dismissal Lawsuits 229
in the job from which you have 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.67
Let’s conclude this chapter with a fun decision that ties together several legal issues we have
considered so far in our review of the common law regime, including modifications to employment contracts (Chapter 7), constructive dismissal (Chapter 13), and the duty to mitigate. Recall
from those earlier chapters that an employer seeking to reduce an employee’s pay cannot just
unilaterally impose the change over the employee’s objection. In the decision outlined in Box
14.6, the employee expressly objected to a pay cut but kept working anyway, receiving the lower
wages imposed by the employer. Pay attention to the argument the employee makes, relying on
the Evans v. Teamsters decision.
BOX 14.6 » CASE LAW HIGHLIGHT
Is it Condonation or Mitigation?
Russo v. Kerr
2010 ONSC 6053
Key Facts: Russo had worked for Kerr for 37 years. A new
president hired in 2009 decided that significant cost reductions were necessary to keep the company economically viable
and that Russo was earning far more than market forces dictated. He informed Russo that he would be cutting his base
pay and bonus by nearly 50 percent. Russo hired a lawyer who
informed the employer that Russo did not agree to the pay cut
and that the cut amounted to grounds for constructive dismissal. Afterwards, Russo continued to work for Kerr, receiving
the reduced pay, and then sued to recover the difference between his old pay and the new reduced pay. The employer
argued that by continuing to work with the reduced pay, Russo
had “condoned” the pay cut (see Chapter 13). Russo argued
that when he continued to work after the pay cut, he was
simply mitigating his damages that resulted from the constructive dismissal that had occurred when his pay was cut by
nearly 50 percent.
Issue: Did Russo condone the pay cut and thereby surrender
his right to claim constructive dismissal, or was Russo mitigating
his losses by continuing to work in his old job with reduced pay?
Decision: Russo was constructively dismissed when the employer cut his pay substantially. Russo clearly informed the
employer that he was not accepting or condoning the pay cut
and that it was his position that the pay cut amounted to a constructive dismissal. Therefore, there was no condonation of the
pay cut. Russo could have argued that the pay cut was a breach
of contract and sued for the difference in pay while keeping
the contract alive. But instead, he opted to argue that the pay
cut was a constructive dismissal and that by continuing to work,
he was simply mitigating his losses as per the Supreme Court’s
direction in the Evans v. Teamsters’ decision. The court ruled
that Russo was entitled to take that position. The court ruled that
22 months was reasonable notice in this case. Damages were
ordered based on that period of time calculated on the basis of
the difference in pay between what Russo would have earned
before the pay cut and what he actually earned working for Kerr
during the period of notice.
V. Chapter Summary
The goal of damages in wrongful dismissal lawsuits is to place the employee back into the position they would have been in had the employee worked through the proper notice period. This
goal is achieved by ordering monetary damages. Aggravated damages are sometimes available
for mental suffering experienced by a dismissed employee as a result of bad faith in the manner
in which they are dismissed. Punitive damages are only ordered when an employer engages in
particularly reprehensible behaviour that the court believes is deserving of additional punishment. In the common law regime, courts do not order the reinstatement of employees to their
former jobs. This approach stands in sharp contrast to that of the other two regimes of work law:
the regulatory standards regime and the collective bargaining regime. If an employer dismisses
an employee in contravention of a requirement to give reasonable notice, the employee must
make efforts to mitigate damages by seeking new employment and maybe even by accepting
re-employment in a job offered by the former employer.
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230 Part II The Common Law Regime
QUESTIONS AND ISSUES FOR DISCUSSION
1. What are “compensatory damages” in a wrongful dismissal action, and how do judges
determine their amount?
2. What is the difference between compensatory and aggravated damages? Explain the circumstances under which a court might order aggravated damages in a wrongful dismissal
lawsuit and provide some examples.
3. Explain the difference between the Supreme Court’s approaches to “bad-faith discharge”
in the Wallace and Honda decisions.
4. What is “specific performance”? Do courts apply it in breaches of employment contracts?
5. What are the conditions in which an employee will be expected to accept a job with the
employer that has just dismissed them as part of an employee’s duty to mitigate?
APPLYING THE LAW
1. Eileen is terminated after 10 years’ service. Her employment contract included a clause that requires the employer to provide Eileen with three months’ notice or
pay in lieu of notice in the event she is terminated
without cause. Her pay is $3,000 per month, plus $200
per month contributed to a pension plan by the employer, plus a $2,000 bonus paid out to every employee who has been employed for a least one year
and who is employed on December 31. Eileen is terminated on November 1. The employer falsely alleged
cause and told Eileen’s co-workers that Eileen had
been fired for stealing money, when in fact there was
no evidence of this. The employer maintained its position that Eileen had stolen money right up to the beginning of the trial, at which point it dropped that
position and admitted that there was no cause. Assume that the court rules there was no cause for ter-
mination and the employer fabricated the false
allegation about theft. The employer’s false allegations
of dishonesty caused Eileen to suffer severe depression
that required her to take medication.
a. Discuss what damages you believe a court would
order in these circumstances. If you believe a court
might order aggravated or punitive damages, explain the tests courts apply when considering those
damages. (You are not expected to know the precise amount a court would order in aggravated or
punitive damages, as these are decided on a caseby-case basis.)
b. Assume now that the employer argues that Eileen
failed to mitigate her losses because she did not
actively look for work during the period of notice.
What argument(s) would you make on Eileen’s behalf in response to that argument?
EXERCISE
Every decision in a successful wrongful dismissal lawsuit will include a discussion and assessment of the damages that the employer must pay to the employee. Many will also include a
discussion of whether the employee has properly mitigated their losses. This exercise encourages
you to find and read some of these decisions and consider how the principles discussed in this
chapter were applied to the facts of those cases.
To learn how the courts have dealt with wrongful dismissal and the duty to mitigate, search
for cases that reference the Evans v. Teamsters case. In this exercise, we “note up” the Evans v.
Teamsters case.
1. Go to the CanLII home page: <https://www.canlii.org>.
2. In the “Noteup” search box, type “Evans v. Teamsters Local Union No. 31” and choose
“Evans v. Teamsters Local Union No. 31, 2008 SCC 20” from the drop-down list that
appears. That search should give you over 100 cases that cite the Evans decision.
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Chapter 14 Damages in Wrongful Dismissal Lawsuits 231
3. Select two cases that involve wrongful dismissal actions in which the matter of the employee’s mitigation efforts was considered and read them. Answer the following questions for
each case:
a. Were compensatory damages ordered? If so, what was the amount ordered?
b. Were either aggravated or punitive damages ordered? If so, describe the employer’s
behaviour that led the court to order such damages.
c. Did the court find that the employee failed to mitigate damages? If so, by how much
was the damages award reduced?
NOTES AND REFERENCES
1. The employee cannot elect to keep the contract alive, as is
the case with other types of contract breach by the employer. See Canadian Ice Machine v. Sinclair, [1955] SCR
777 at 4; and Gunton v. Richmond-upon-Thames London
Borough Council, [1982] Ch. 448.
2. See the discussion of these basic principles of wrongful dismissal law in Merrill Lynch Canada Inc. v. Soost, 2010
ABCA 251; Taggart v. Kwikasair Express Ltd., 1980 CanLII
382 (BCCA) at 353; and Vorvis v. Insurance Corporation of
British Columbia, [1989] 1 SCR 1085.
3. Fidler v. Sun Life Assurance Co. of Canada, 2006 SCC 30.
See also Nygard International Ltd. v. Robinson, 1990 CanLII
1991 (BCCA) at 106; Robinson v. Harman, [1848] 154 ER
363; and Wertheim v. Chicoutimi Pulp Co., [1911] AC 301.
4. An example is the British decision Hill v. C.A. Parsons and
Co. Ltd., [1972] Ch. 305. A key factor in cases where reinstatement has been ordered is the absence of animosity
between the parties and continued mutual trust and confidence that survived the act of terminating the contract.
5. International Brotherhood of Electrical Workers, Local
Union 2085 et al. v. Winnipeg Builders’ Exchange et al.,
[1967] SCR 628.
6. Philp v. Expo 86 Corp., 1987 CanLII 2476 (BCCA) at para
45. See also DeFrancesco v. Barnum, [1890] 45 Ch. D 430 at
438. The traditional justifications for the refusal of common
law courts to order specific performance include the difficulty courts would have supervising a reinstatement order
of a non-union employee and that there should be “mutuality” in contract remedies, and since a mandatory order for
an employee to return to work would amount to a form of
slavery, the courts should not order employers to take back
employees against their will. See the discussion in S. Honeyball, Employment Law, 12th ed (Oxford: Oxford University Press, 2012) at 84.
7. Whether the common law should revisit its opposition to
reinstatement as a remedy for breach of the employment
contract is a hotly debated question. See, for example, D.
Brodie, “Specific Performance and Employment Contracts”
(1998) 27 Indus LJ 37 (specific performance should be
allowed); and R. Epstein, “In Defense of the Contract at
Will” (1984) 51 U Chicago L Rev 947 (reinstatement should
not be permitted, and there should be no requirement to
give notice of termination).
8. Nygard International Ltd. v. Robinson, supra note 3 at 106;
Michaels v. Red Deer College (1974), 44 DLR (3d) 447 (Alta.
SC (AD)); Roe, McNeill & Co. v. McNeill, 1998 CanLII 6230
(BCCA); Davidson v. Allelix Inc., 1991 CanLII 7091 (Ont.
CA); Sylvester v. British Columbia, [1997] 2 SCR 315; and
Paquette v. TeraGo Networks Inc., 2016 ONCA 618.
9. Johnson v. Global Television Network Inc. (CH Vancouver
Island), 2008 BCCA 33 at para 23. See also Wallace v.
United Grain Growers Ltd., [1997] 3 SCR 701 at para 61;
and Sylvester v. British Columbia, supra note 8. The assumption is that the employee would have worked during the
notice period. An employee who would have remained in
receipt of disability benefits throughout the notice period
will have those benefits deducted from damages for lost
wages if the employer pays both the wages and the benefits
directly. However, if the insurance benefits are paid by a
third-party insurer, then the disability benefits are not
deductible from the wages award: McNamara v. Alexander
Centre Industries Ltd., 2001 CanLII 3871 (Ont. CA); and
Sills v. Children’s Aid Society of the City of Belleville, 2001
CanLII 8524 (Ont. CA).
10. Hadley v. Baxendale, [1854] 156 ER 145 at 151, applied by
the Supreme Court of Canada in Honda Canada Inc. v.
Keays, 2008 SCC 39 at paras 54-56.
11. Note that the test for remoteness and reasonable contemplation in Hadley v. Baxendale also applies to a contractual
breach by an employee that causes an employer to suffer
monetary loss. For a good discussion of this scenario, see
RBC Dominion Securities Inc. v. Merrill Lynch Canada Inc.,
2008 SCC 54 at para 12.
12. See Garcia v. 1162540 Ontario Inc., 2013 ONSC 6574 (the
employee called no evidence to establish he suffered a loss
as a result of the termination and therefore no damages
were ordered). See also Red Deer College v. Michaels, [1976]
2 SCR 324 at para 11.
13. See, for example, Rieta v. North American Air Travel Insurance Agents Ltd., 1998 CanLII 6540 (BCCA) (evidence
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232 Part II The Common Law Regime
established that overtime pay would have been earned
during the notice period); Alishah v. 1582557 Ontario Ltd.,
2007 CanLII 243 (Ont. Sup Ct J); Lewis v. Lehigh Northwest
Cement Limited, 2009 BCCA 424 (even though the employee had received annual raises in the past, evidence was
unclear that he would have received a raise during the
notice period); Olivares v. Canac Kitchens, 2012 ONSC 284;
and Kwasnycia v. Goldcorp Inc., 1995 CanLII 7276 (Ont.
Gen Div) (lost overtime was payable).
14. Lewis v. Lehigh Northwest Cement Limited, supra note 13;
and Durrant v. British Columbia (Hydro and Power Authority), 1990 CanLII 271 (BCCA). See also Potter v. New
Brunswick Legal Aid Services Commission, 2015 SCC 10
(pension payments made to employee were not to be
deducted from wrongful dismissal damages).
15. Stauder v. BC Hydro & Power Authority, 1988 CanLII 3037
(BCCA) (assessing the value of loss of vacation time at
$2,500); Kwasnycia v. Goldcorp Inc., supra note 13 (the
value of lost paid vacation was estimated at 10 percent of
income); Dussault v. Imperial Oil Limited, 2019 ONCA 448;
and Paquette v. TeraGo Networks Inc., supra note 8.
16. Baumgart v. Convergent Technologies Canada (1989), 28
CCEL 250 (BCSC); McDonald v. GBC Canada Inc., 2004
BCSC 1029; and Wood v. BBC Brown Boveri Canada Inc.,
1986 CanLII 1215 (BCCA).
17. Mothersele v. Gulf Canada Resources Ltd., 2003 ABQB 2;
Veer v. Dover Corp. (Canada) Ltd., 1997 CanLII 12429
(Ont. Gen Div); Kieran v. Ingram Micro Inc., 2004 CanLII
4852 (Ont. CA); and Saalfeld v. Absolute Software Corporation, 2009 BCCA 18.
18. Alcatel Canada Inc. v. Egan, 2006 CanLII 108 (Ont. CA).
19. It is more complicated if the employer terminated benefits
coverage during the notice period and the employee does
not actually incur any financial costs as a result. In British
Columbia, the courts have ruled that an employee can
recover money for a loss of benefits coverage during the
notice period only if they can demonstrate an actual financial loss resulting from the absence of the coverage, such as
the purchase of replacement insurance coverage: Sorel v.
Tomenson Saunders Whitehead Ltd., 1987 CanLII 154
(BCCA); and Matheson v. Canadian Freightways Ltd., 2003
BCSC 1728. In other provinces, including Ontario, Alberta,
and Manitoba, the courts have ruled that an employee can
be reimbursed the amount the employer would have paid
for the benefits for the duration of the notice period,
regardless of whether the employee had purchased new
insurance or incurred actual financial loss due to the
absence of insurance: Davidson v. Allelix Inc., 1991 CanLII
7091 (Ont. CA); Kapitany v. Thomson Canada Ltd., 2001
MBCA 167; and Christianson v. North Hill News Inc., 1993
ABCA 232.
20. See, for example, Alguire v. Cash Canada Group Ltd., 2007
ABCA 351 (the employee would not have qualified for the
bonus during the notice period). Where a payment is
within the employer’s discretion, it will not be recoverable
in damages because the courts assume that employers exercise their discretion in a manner that maximizes their own
financial interests. However, the employer’s discretion to
deny a bonus to a dismissed employee must not be exercised in bad faith or unreasonably: Burns v. Oxford Development Group Inc. (1992), 128 AR 345 (QB); and Lippa v.
Can-Cell Industries Inc., 2009 ABQB 684.
21. See, for example, Devlin v. NEMI Northern Energy &
Mining Inc., 2010 BCSC 1822 (the contract made payment
of bonus mandatory); Hobbs v. TDI Canada Ltd., 2004
CanLII 44783 (Ont. CA) (the contract required payment of
commissions); Prozak et al. v. Bell Telephone Co. of Canada,
1984 CanLII 2065 (Ont. CA); Noble v. Principal Consultants
Ltd. (Bankrupt), 2000 ABCA 133; Hyland v. Advertising
Directory Solutions Inc., 2014 ABQB 336; and Paquette v.
TeraGo Networks Inc., supra note 8.
22. Machtinger v. HOJ Industries Ltd., [1992] 1 SCR 986; and
Reference Re Public Service Employee Relations Act (Alta.),
[1987] 1 SCR 313 at 368.
23. The leading cases on this point are Peso Silver Mines Ltd. v.
Cropper, [1966] SCR 673; Vorvis v. Insurance Corporation of
British Columbia, supra note 2; and Addis v. Gramophone
Co., [1909] AC 488 (HL). For criticisms of the courts’ historical approach to damages for mental suffering arising
from breach of the employment contract, see J. Swan,
“Extended Damages and Vorvis v. Insurance Corporation of
British Columbia” (1990) 16 Can Bus LJ 213; R.B. Schai,
“Aggravated Damages and the Employment Contract”
(1991) 55 Sask L Rev 345; and D. Doorey, “Employer Bullying: Implied Duties of Fair Dealing in Canadian Employment Contracts” (2005) 30 Queen’s LJ 500. Justice Binnie of
the Supreme Court explained that “aggravated damages”
are intended to compensate the victim for “the additional
harm caused to the plaintiff ’s feelings by reprehensible or
outrageous conduct on the part of the defendant”: Whiten
v. Pilot Insurance Co., 2002 SCC 18 at para 116.
24. Wallace v. United Grain Growers Ltd., supra note 9 at
para 102.
25. Ibid. at para 95.
26. The Wallace decision has been examined exhaustively by
academics and practitioners. Some examples include
Doorey, supra note 23; L. Stuesser, “Wrongful Dismissal—
Playing Hardball: Wallace v. United Grain Growers” (199798) 25 Man L Rev 547; J. Fudge, “Limits of Good Faith in
the Contract of Employment: From Addis to Vorvis to
Wallace and Back Again” (2007) 32 Queen’s LJ 529.
27. B. Curran, “Honda v. Keays: Employer Shield or Employee
Sword? An Empirical Analysis” (unpublished manuscript,
2013).
28. See the observations of Justice Echlin in Yanez v. Canac
Kitchens, 2004 CanLII 48176 7 (Ont. Sup Ct J), which
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Chapter 14 Damages in Wrongful Dismissal Lawsuits 233
decried the routine pleading of “specious ‘Wallace claims’”
by employees.
29. See the discussion in P. Veel, “Clarity and Confusion in
Employment Law Remedies: A Comment on Honda
Canada Inc. v. Keays” (2009) 67 UT Fac L Rev 135.
30. Capital Pontiac Buick Cadillac GMC Ltd. v. Coppola, 2013
SKCA 80; Hughes v. Gemini Food Corp., 1997 CanLII 1267
(Ont. CA); Noseworthy v. Riverside Pontiac-Buick Ltd., 1998
CanLII 2751 (Ont. CA); and Wallace v. United Grain
Growers Ltd., supra note 9.
31. Price v. 481530 B.C. Ltd., 2016 BCSC 1940; Davies v.
Canada Shineray Suppliers Group Inc., 2017 BCSC 304;
Valle Torres v. Vancouver Native Health Society, 2019 BCSC
523; Pate Estate v. Galway-Cavendish and Harvey (Township), 2013 ONCA 669; Pagliaroli v. Rite-Pak Produce Co.
Limited, 2010 ONSC 3729; Antonacci v. Great Atlantic &
Pacific Company of Canada, 2000 CanLII 5496 (Ont. CA);
and Geluch v. Rosedale Golf Assn., 2004 CanLII 14566 (Ont.
Sup Ct J).
32. Simmons v. Webb, 2008 CanLII 67908 (Ont. Sup Ct J)
(handing a 20-year employee a termination letter with no
explanation and telling him to leave the property immediately); Chapell v. Canadian Pacific Railway Company, 2010
ABQB 441 (the employer engaged in a case-building exercise to get rid of the employee); Rae v. Attrell Hyundai
Suburu, 2005 CanLII 42475 (Ont. CA) (a termination letter
was sent two weeks before the employee was to give birth);
Kaiser v. Dural, 2003 NSCA 122 (dismissing an employee
who recently recovered from illness in a restaurant without
any care for the employee’s circumstances); and Vernon v.
British Columbia (Liquor Distribution Branch), 2012 BCSC
133 (employee’s wife learned of the termination when an
insurance company told her).
33. Baughn v. Offierski, 2001 CanLII 28291 (Ont. Sup Ct J);
Middleton v. Highlands East (Municipality), 2013 ONSC
763.
34. Strudwick v. Applied Consumer & Clinical Evaluations Inc.,
2016 ONCA 520; Marshall v. Watson Wyatt & Co., 2002
CanLII 13354 (Ont. CA); and McCulloch v. Iplatform Inc.,
2004 CanLII 48175 (Ont. Sup Ct J).
35. Prinzo v. Baycrest Centre for Geriatric Care, 2002 CanLII
45005 (Ont. CA); Doyle v. Zochem Inc., 2017 ONCA 130;
Strudwick v. Applied Consumer & Clinical Evaluations Inc.,
supra note 34; Colistro v. Tbaytel, 2019 ONCA 197 (rehiring
an employee who formerly harassed a current employer);
Boucher v. Wal-Mart Canada Corp., 2014 ONCA 419; and
Galea v. Wal-Mart Canada Corp., 2017 ONSC 245.
36. Galea v. Wal-Mart Canada Corp., supra note 35.
37. See Curran, supra note 27 at 23, finding that bad-faith discharge damages are “about 10 percentage points less probable” in the post-Honda era compared with during the
Wallace era.
38. See the discussion in Veel, supra note 29 at 149.
39. The employee is not required to present medical or expert
evidence to demonstrate harm, but there must be some evidentiary basis to demonstrate a link between the employer’s
bad faith in the manner of discharge and harm suffered:
Lau v. Royal Bank of Canada, 2017 BCCA 253; and
Cottrill v. Utopia Day Spas and Salons Ltd., 2018 BCCA 383.
See also discussion in Saadati v. Moorhead, 2017 SCC 28;
and Galea v. Wal-Mart Canada Corp., supra note 35.
40. See, for example, Fox v. Silver Sage Housing Corporation,
2008 SKQB 321 (the employer’s behaviour met the standard
of bad-faith dismissal, but the employee failed to prove that
he suffered damages as a result of the conduct). Other cases
where the employee failed to demonstrate damage include
Beggs v. Westport Foods Ltd., 2011 BCCA 76; Kelly v. Norsemont Mining Inc., 2013 BCSC 147; Brien v. Niagara Motors
Limited, 2009 ONCA 887; Chan v. Dencan Restaurants Inc.,
2011 BCSC 1439; and Elgert v. Home Hardware Stores
Limited, 2011 ABCA 112.
41. Curran, supra note 27 at 24 (“employees who can prove
high levels of psychological distress will enjoy higher
returns … in terms of moral damages”).
42. See, for example, Bru v. AGM Enterprises Inc., 2008 BCSC
1680 (a low-wage employee who was entitled to just three
months’ reasonable notice was awarded an additional
$17,000 for bad-faith discharge, roughly equivalent to ten
months’ pay).
43. Colistro v. Tbaytel, supra note 35.
44. Honda Canada Inc. v. Keays, supra note 10 at para 62;
Whiten v. Pilot Insurance Co., supra note 23; Pate Estate v.
Galway-Cavendish and Harvey (Township), supra note 31;
and Elgert v. Home Hardware Stores Limited, supra note 40.
45. Whiten v. Pilot Insurance Co., supra note 23 at para 94.
46. In Honda Canada Inc. v. Keays, supra note 10, the court
ruled that the independent actionable wrong cannot be an
alleged violation of human rights legislation, such as discrimination on the basis of disability, because Seneca
College v. Bhadauria, [1981] 2 SCR 181 (which we considered in Chapter 6) foreclosed that option. In any event, the
court did not believe that Keays had been discriminated
against. Therefore, Keays’s claim for punitive damages
failed.
47. Boucher v. Wal-Mart Canada Corp., supra note 35. See also
Kelly v. Norsemont Mining Inc., supra note 40 ($100,000 in
punitive damages for breach of implied obligation of “good
faith and fair dealing” was owed by the employer to the employee); Nishina v. Azuma Foods (Canada) Co., Ltd., 2010
BCSC 502. See also the discussion in D. Doorey, “Boucher
v. Walmart: Court of Appeal Confirms an Implied Obligation of Good Faith and Fair Dealing in Employment Contracts,” online, Law of Work (blog): <http://lawofwork​
.ca/?p=7487>.
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234 Part II The Common Law Regime
48. Galea v. Wal-Mart Canada Corp., supra note 35.
49. Bailey v. Service Corporation International (Canada) ULC,
2018 BCSC 235. See also Vernon v. British Columbia
(Liquor Distribution Branch), supra note 32 ($50,000 punitive damages awarded when employer refused to provide a
reference letter unless the employee quit rather than be
terminated).
50. The courts call contract terms that promise the payment of
a predetermined amount “liquidated damages” or “contractual amounts.” These amounts are payable and not subject
to the duty to mitigate. See Bowes v. Goss Power Products
Ltd., 2012 ONCA 425 (Ontario Court of Appeal ruled that
a contract that specified the right of the employer to terminate the employment contract with “six months’ notice
or pay in lieu” was a promise to pay a fixed amount and
therefore that amount was not subject to a duty to mitigate.
Note that a contract requiring liquidated damages could
also include a separate requirement for the employee to
seek new employment and to mitigate their loss. However,
there is no implied duty to mitigate in the case of liquidated
damages.)
51. See ibid.; Howard v. Benson Group Inc. (The Benson Group
Inc.), 2016 ONCA 256 (not duty to mitigate damages when
employer terminates a fixed-contract early). See also
Maxwell v. British Columbia, 2014 BCCA 339; Covenoho v.
Pendylum Ltd., 2017 ONCA 284; Philp v. Expo 86 Corp.,
supra note 6; Duxbury v. Crook, 2018 SKQB 353; Halischuk
v. Color Ad Packaging Ltd., 2015 MBQB 4; Brown v. Pronghorn Controls Ltd., 2011 ABCA 328; Freudenberg Household
Products Inc. v. DiGiammarino, 2012 ONSC 5725; and Allen
v. Ainsworth Lumber Co. Ltd., 2013 BCCA 271.
52. Red Deer College v. Michaels, supra note 12 at 331.
53. Evans v. Teamsters Local Union No. 31, 2008 SCC 20 at para
30; and Robinson v. Team Cooperheat—MQS Canada Inc.,
2008 ABQB 409 at para 122.
54. Robinson v. Team Cooperheat—MQS Canada Inc., supra
note 53 at para 120. See also Chand v. Craftsman Collision
Ltd., 2007 BCPC 11; and Christianson v. North Hill News
Inc., supra note 19.
55. Forshaw v. Aluminex Extrusions Ltd., 1989 CanLII 234
(BCCA); and Dussault v. Imperial Oil Limited, supra note
15.
56. Fillmore v. Hercules SLR Inc., 2017 ONCA 280; Rienzo v.
Washington Mills Electro Minerals Corporation, 2005
CanLII 44668 (Ont. CA); Fleet v. EPC Industries Ltd., 2004
NBQB 433; Schamborzki v. North Shore Health Region, 2000
BCSC 1573; Carter v. 1657593 Ontario Inc. (The Olde Angel
Inn), 2015 ONCA 823; and Dussault v. Imperial Oil Limited,
supra note 15.
57. Christianson v. North Hill News Inc., supra note 19 at para
16: “[t]o apply for jobs for which one is on their face
unqualified is an amateur approach which we cannot say
that the reasonable person would follow, or that a plaintiff
must follow to mitigate.”
58. Christianson v. North Hill News Inc., supra note 19 at para
15.
59. Ibid. (the employee did not fail to mitigate when she took a
six-month training program).
60. Ariss v. NORR Limited Architects & Engineers, 2019 ONCA
449 (an employee in his 60s is entitled to limit mitigation
efforts to the Kingston area where he lived); Maasland v.
Toronto (City), 2016 ONCA 551 (no duty to accept a job 50
kilometres from home); and Peet v. Babcock & Wilcox
Industries Ltd., 2001 CanLII 24077 (Ont. CA). If mitigation
results in the employee moving, the costs of the move may
be added to the wrongful dismissal damages: Carbone v.
Syncrude Canada Ltd., 1997 CanLII 14863 (Alta. QB). See
the discussion, including the summary of contrasting opinions on the recoverability of moving expenses, in Porta v.
Weyerhaeuser Canada Ltd., 2001 BCSC 1480 at paras
153-65.
61. Hart v. EM Plastic & Electric Products Ltd., 2008 BCSC 228.
See similarly Hyland v. Advertising Directory Solutions Inc.,
supra note 21 (the employee’s decision to pursue a career as
a securities trader was not considered reasonable mitigation). Cases in which the pursuit of self-employment was
found to be reasonable mitigation include Peet v. Babcock &
Wilcox Industries Ltd., supra note 60; and Beglaw v. Archmetal Industries Corp., 2004 BCSC 1369.
62. Coutts v. Brian Jessel Autosports Inc., 2005 BCCA 224 (the
employee failed to mitigate when he held out for a job
selling Ferraris, when opportunities with other luxury car
dealers existed).
63. Cox v. Robertson, 1999 BCCA 640 at para 16.
64. Evans v. Teamsters Local Union No. 31, supra note 53 at
para 30 (the employee failed to mitigate when he refused
to continue to work for the employer during the notice
period even though he had earlier proposed doing exactly
that; continuing in his job as a form of mitigation would
not have caused the employee humiliation or embarrassment, and the workplace was not hostile). See also
Mifsud v. MacMillan Bathurst Inc., 1989 CanLII 260
(Ont. CA).
65. Cases in which the employee was not required to mitigate
in a job offered by the former employer include Brake v.
PJ-M2R Restaurant Inc., 2017 ONCA 402; Chandran v.
National Bank of Canada, 2012 ONCA 205; Patrick Bannon
v. Schaeffler Canada Inc./FAG Aerospace Inc., 2013 ONSC
603; Turner v. Inndirect Enterprises Inc., 2011 ONCA 97;
Farwell v. Citair, Inc. (General Coach Canada), 2014 ONCA
177; Colwell v. Cornerstone Properties Inc., 2008 CanLII
66139 (Ont. Sup Ct J); Sifton v. Wheaton Pontiac Buick
GMC (Nanaimo) Ltd., 2010 BCCA 541; Magnan v. Brandt
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Chapter 14 Damages in Wrongful Dismissal Lawsuits 235
Tractor Ltd., 2008 ABCA 345; Stewart v. Keary Coyle Motors
Ltd., 2011 NBQB 297; Renard v. Facet Decision Systems Inc.,
2010 BCSC 1908; and Piron v. Dominion Masonry Ltd.,
2013 BCCA 184.
66. Cases in which the employee was required to mitigate in a
job offered by the former employer include Silva v. Leippi,
2011 BCCA 495; Davies v. Fraser Collection Services
Limited, 2008 BCSC 942; Besse v. Dr. A.S. Machner Inc.,
2009 BCSC 1316; Ghanny v. 498326 Ontario Limited, 2012
ONSC 3276; and Fredrickson v. Newtech Dental Laboratory
Inc., 2014 BCSC 335.
67. Evans v. Teamsters Local Union No. 31, supra note 53 at para
92. The requirement to mitigate in a job with the former
employer also creates some conceptual challenges for contract law, which I have discussed in a couple of longer posts
on the Law of Work blog. See D. Doorey, “Chevalier v.
Active Tire: The Mystery of Mitigating in the Job from
Which You’ve Just Been Fired,” online, Law of Work (blog):
<http://lawofwork.ca/?p=7001>; and D. Doorey, “Silva v.
Leippi: Is Employment Law Losing Touch with Common
Sense?” online, Law of Work (blog): <http://lawofwork​
.ca/?p=4347>.
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Copyright © 2020 Emond Montgomery Publications
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C H A P T E R 15
“I Quit!”: Termination of the
Employment Contract by the
Employee
LEARNING OBJECTIVES
CHAPTER OUTLINE
After reading this chapter, students will be able to:
I. Introduction 237
II. The Test for Assessing Whether an Employee Has Resigned 238
III. The Requirement for an Employee to Give an Employer
Notice of Termination 239
IV. Calculating Damages When an Employee Fails to Give Proper Notice of
Termination 242
V. Chapter Summary 243
Questions and Issues for Discussion 243
Notes and References 244
• Describe the test used to assess whether a resignation has
occurred.
• Explain how the courts assess the “reasonable notice” employees
are required to provide employers when they resign.
• Explain how damages are calculated if an employee resigns
without giving proper notice.
I. Introduction
After arguing with a passenger and getting hit in the head with a piece of luggage, JetBlue flight
attendant Steve Slater grabbed the plane’s microphone, cursed at the passenger, grabbed a beer,
announced “it’s been great,” opened the plane’s emergency exit, and slid down the emergency
chute to unemployment.1 Now that is a quit!
Slater had had enough, and he left little doubt that he was resigning his employment. He did
not return to work (in fact, he faced criminal charges). However, as we will learn in this chapter,
it is not always clear whether an employee really intends to quit. Even if an employee yells
“I QUIT!” and storms out of the workplace, a judge might rule that a resignation has not
occurred. The courts demand clear evidence of an intention to resign and allow employees the
occasional temper tantrum.
When an employee does wish to resign, they usually must provide the employer with notice of
termination. An employee who resigns without providing the employer with the notice required
by the contract may be sued by the employer for wrongful quitting. How much notice is
required may be specified in the expressed terms of the contract or, in some provinces, in
employment standards legislation (see discussion in Chapter 20), or the courts may imply the
standard term requiring “reasonable notice” that we learned about in Chapter 9. The manner in
resignation: When an employee terminates the employment contract by engaging in conduct that evinces a clear intention
to terminate the contract.
wrongful quitting: A term sometimes used to describe a lawsuit filed by an employer alleging that an employee resigned
without providing the employer with the proper amount of notice of resignation.
237
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238 Part II The Common Law Regime
which the courts assess the reasonable notice required of an employee is different than that
required of an employer because the purpose of the notice is different. This chapter explores
various legal issues that arise when employees terminate the employment contract.
II. The Test for Assessing Whether an Employee Has Resigned
How do we know a resignation when we see one? Slater’s flamboyant exit via the plane’s emergency chute sure looked like a resignation. But most employees are not so dramatic, and the
circumstances are not always so straightforward. Imagine that an employer says to its employee,
“Jen, you should quit, and if you don’t, I’m going to fire you.” For many reasons, Jen might prefer
to quit rather than be fired, so she says, “Fine, I quit.”2 The benefit to the employer of an employee quitting rather than being fired is obvious: the employer is relieved of the obligation to
give notice of termination and the potential costs associated with that notice. However, the news
gets worse for the employee. In addition to losing her job and entitlement to notice of termination, if Jen quits she may lose her entitlement to other statutory benefits, such as severance payments under employment standards legislation and employment insurance benefits (see the
online chapter, “Regulating Unemployment” referenced on p. xxi in the preface of this book). It
matters significantly in our legal model whether the employer