Rule Changes to Small Claims Court and Simplified Procedure in Ontario

Effective January 1, 2020, the monetary jurisdiction of Small Claims Court has increased from $25,000 to $35,000. This is an important change for employment law as many wrongful dismissal cases will fall within this jurisdiction. Small Claims Court has streamlined procedures and often moves significantly faster than other levels of the Court.

In addition, the monetary jurisdiction for Simplified Procedure (which has several procedural differences from the “regular procedure” such as time limits on discovery and length of trial) increases from $100,000 to $200,000.  Most employment cases will fall within either the Small Claims Court or Simplified Procedure.

Along with the increase in the monetary jurisdiction for Small Claims Court and Simplified Procedure, there have been other significant changes to amounts that can be awarded for costs, if successful. Under Rule 76.12.1 no party to an action under this Rule may recover costs exceeding $50,000.00 or disbursements exceeding $25,000.00, excluding HST. These cost limitations do not apply to actions commenced before January 1, 2020, although the other changes set out below will impact ongoing cases, such as:

  • The parties must agree to a Trial Management Plan at least 30 days before a pre-trial conference which includes a list of every witness, a detailed time allocation for opening statements, witnesses, cross-examination, re-examination and closing arguments;
  • Trials are capped at five (5) days;
  • No Jury Trials in Simplified Procedure, unless it is for slander, libel, malicious arrest, malicious prosecution or false imprisonment;
  • Each party will have up to three (3) hours for Examinations for Discovery (an increase from two (2) hours); and
  • The procedure for a trial of an action under the Simplified Rules has been outlined.

An increase in the monetary amount for Simplified Procedure and a cap on costs provides some certainty regarding costs. At the same time, the cap will lead counsel to consider the cost consequences of going to Trial and forces the parties take proactive steps to manage the trial process.  The changes represent an attempt by the Ontario Government to streamline the system, reduce the amount of trial time required and to create additional efficiencies in an effort to address a backlogged civil court system. Only time will tell if these changes are successful in accomplishing that motive.

Practical Limitations: How far must an Employer go in order to protect Workers under the Canada Labour Code?

The Supreme Court of Canada recently heard the appeal of Canada Post Corp. v. Canadian Union of Postal Workers 2019 SCC 67 dealing with section 125(1)(z.12) of the Canada Labour Code. Section 125(1)(z.12) of the Canada Labour Code requires that the work place committee or the health and safety representative inspects all or part of the work place each month, so that every part of the work place is inspected at least once each year.

The Union in this case argued that letter carrier routes and points of call should be included in work place safety inspections. Canada Post argued that it was not in control of that part of the workplace. The Court examined the question of whether or not an employer had “control” over the letter carrier routes such that they were required to comply with the health and safety obligations set out in Part II of the Canada Labour Code.

The conclusion made by the appeals officer of the Occupational Health and Safety Tribunal indicated that s.125(1)(z.12) can only apply to work places over which the employer has control “because the purpose of the workplace inspection obligation is to permit the identification of hazards and the opportunity to fix them or to have them fixed. Control over the workplace is necessary to do so”. As Canada Post had no control over letter carrier routes and points of call, the obligation that the workplace be inspected by the Committee could not apply to those locations. After applying the clarified standard of reasonableness (which requires a significant amount of deference to the decision-maker and focus on the reasons for the decisions) found in Canada v. Vavilov, the Supreme Court decided that the original decision from the appeals officer was reasonable.  Indeed, the majority of the Supreme Court held that the appeals officer’s reasoning demonstrated an in-depth understanding of the ways in which an employer fulfills the purposes of the Code, bearing in mind the practical limitations of the workplace.

Standard of Review Clarified – Vavilov and the Supreme Court’s Decision

The long-awaited decision of Canada v. Vavilov, 2019 SCC 65 was recently released. The decision dealt with a case of a young man, born in Toronto, who had his citizenship put into question because he had Russian spies as parents. While it is an interesting case and certainly deserves a read, of more importance (depending on who you ask) is the Supreme Court’s commentary on the changes to the standard of review applicable to administrative tribunals and arbitrators.

The Supreme Court decided that there will be a presumption that the reasonableness standard should be applied to all administrative tribunal decisions except in limited circumstances. With this decision, the Supreme Court has signalled an even higher level of deference will be afforded to specialized tribunals in most cases. The Supreme Court has rejected the contextual approach to the reasonableness standard and has ruled that only the following limited circumstances would attract a standard of correctness:

  • Where there is clear statutory language that prescribes the applicable standard of review, or provides for statutory appeal;
  • Where constitutional questions need to be decided, including the division of powers between Parliament and the provinces, the relationship between the legislature and the other branches of the state, the scope of Aboriginal and treaty rights under the Constitution Act, 1982;
  • Where there are general questions of law of central importance to the legal system as a whole;
  • Where there are questions regarding the jurisdictional boundaries between two or more administrative bodies; and
  • A future category should the circumstances arise, where it is exceptional in nature and consistent with the framework and the overarching principles set out in the decision.

In adopting these limited criteria where the correctness standard will apply, the Supreme Court has also determined that “true questions of jurisdiction” will no longer attract a standard of correctness. The Court indicated that while there had been arguments for maintaining the category, specifically the concern that a delegated decision-maker should not be free to determine the scope of its own authority, that such an issue could be addressed by applying the framework for conducting a reasonableness review. In other words, it remains open to a party to challenge a decision-maker on the grounds that it acted beyond its jurisdiction if the decision is unreasonable.

With respect to the reasonableness standard of review, the Supreme Court clarified the standard slightly and provided some in-depth guidance.  The reasonableness standard is meant to limit judicial interference unless it is absolutely necessary to do so to safeguard the legality, rationality and fairness of the administrative process. A reasonable decision and in particular the underlying rationale for a decision must be transparent, intelligible and justifiable. A failure to provide logical and rational reasoning may provide a basis for judicial intervention and require that a decision be set aside. Employers should be aware that a decision from an administrative tribunal is, from a practical perspective, often the final decision-maker and that in the absence of clear and obvious errors by the administrative tribunal, the Court will not intervene.

Employer Health Tax – Who is the Employer in a Tripartite Relationship?

The Court of Appeal has rendered a decision concerning the Employer Health Tax (“EHT”) and in particular, where an employee is hired through a Temporary Placement Agency, who is responsible for paying this tax.

In the case of Azur Human Resources Ltd. v. Ontario (Minister of Revenue) the case dealt with an appeal by a placement agency (the “Agency”) regarding Employer Health Tax. The Agency supplied temporary workers to the Public Service of Canada and federal agencies under agreements between the Agency and the Government of Canada. The function of the Agency was simply to pay the worker and administer the payroll on the basis of time sheets that were signed by the Government.

The Agency appealed the decision that they should be liable for the Employer Health Tax, on account of the fact that they were only the payors, and the clients (the Government of Canada) actually managed, and directed the workers while they carried out an assignment.

The Court of Appeal determined that the original appeal judge correctly decided that the workers, the Agency and the government were in a tripartite relationship. As a result, both the government and the Agency had some aspects that made each party an employer. However, after analyzing the Employer Health Tax Act (EHTA), the appeal judge indicated that the legislation provides that “the employer is the party who pays remuneration to the employee”. In this regard, the Agency would be the employer for the purposes of the EHTA. The Court of Appeal agreed with the decision.

The result is that in such tripartite relationships, the payor of the salaries will be required to pay the EHT.

The Enforceability of Termination Clauses and the Waiver of Common Law Notice

On May 5, 2019, the Ontario Court of Appeal released the Ariss v. NORR Limited Architects & Engineers decision. The majority decision from the Court of Appeal is an important decision for employers regarding the enforceability of termination clause in employment agreements.

In 2002, NORR acquired the company that employed Mr. Ariss and continued his employment, which had commenced in 1986. Mr. Ariss signed an employment contract. Mr. Ariss acknowledged that he had read, understood and accepted the offer of employment which included a provision that purported to limit notice and severance entitlements to the minimum statutory provisions of the Ontario Employment Standards Act, 2000 (the “ESA”).

In 2006, Mr. Ariss signed a new employment contract, which contained similar provisions that limited entitlements upon termination to the ESA. Mr. Ariss agreed that he had read and understood the provisions which, again, included a waiver of his common law entitlements to reasonable notice at common law.

In 2013, Mr. Ariss raised the possibility of reducing his hours to part-time hours. On July 31, 2013, the employer provided Mr. Ariss with an “Offer of Casual Employment”, which contained the following provision: “Either party may terminate this agreement by providing the minimum notice required under the Employment Standards Act of Ontario.”

NORR terminated Mr. Ariss’ employment on January 26, 2016. NORR did not recognize his 30 years of service, and instead gave him 3.5 weeks’ notice of termination based on his part-time service from July 2013. No severance pay was paid. On a motion for summary judgement, the Court agreed with Mr. Ariss that he had been continuously employed for approximately 30 years (rejecting the employer’s argument that he had resigned in 2013) and NORR was required to pay him additional statutory payments arising from his termination. Specifically, he was entitled to 8 weeks of termination pay and 26 weeks of severance pay as required under the ESA. At the same time, however, and most importantly for employers, the motions court held that Mr. Ariss had clearly and unequivocally waived any entitlement to reasonable notice at common law and limited any claim to his statutory entitlements.

The Court of Appeal unanimously agreed with the lower court that the employee clearly and unequivocally waived his entitlement to reasonable notice at common law. This waiver was reinforced by the various agreements that were accepted throughout the employment relationship. There was no basis to interfere with the employee’s waiver of the common law entitlement to reasonable notice. For employers, the Court of Appeal has confirmed the basic and well-established principle that employment agreements may clearly limit an employee’s entitlements upon termination to the minimum statutory requirements as contained in the ESA. If you have any questions about your employment agreements or the enforceability of termination provisions in your employment contracts, please do not hesitate to contact us.

Dependant Contractors – More than 50% of Income

A dependent contractor is a status that is essentially a middle ground between an employee and an independent contractor. Where a court has determined that the individual does not fall into the category of employee, the court will undertake a test to determine whether the worker is either a dependent contractor or an independent contractor. It is important to understand if an individual is a dependent contractor, he or she may be entitled to what is called “reasonable notice” on termination, unlike independent contractors.

In the recent case Thurston v. Ontario, the Court of Appeal dealt with a lower court’s ruling whereby the court determined that a sole practitioner lawyer who provided legal services to the Office of the Children’s Lawyer (“OCL”) pursuant to a series of agreements over 13 years, was a dependent contractor. The lawyer had her own independent legal practice and that practice formed a majority of her billings. The work that she billed from the OCL only formed an average of 39.9% of her billings.

The agreement provided the ability for the OCL to terminate the agreement at any time, and provided no guarantee of work. At trial, the motion judge found that the lawyer’s relationship with OCL was continuous over a 13-year period with no break. During that period, the lawyer performed work under the control of OCL and was perceived by the public to be an employee of OCL. In the reasons provided by the judge, he indicated that the permanence of the relationship, the fact that she performed work that was integral to OCL, and the perception that she was an OCL lawyer, all pointed to a dependent contractor relationship.

On Appeal, the Court of Appeal disagreed that she was a dependent contractor and that the judge had misapprehended the nature of the legal standard and failed to give effect to several relevant considerations. The Court indicated that a dependent contractor relationship required “a certain minimum economic dependency, which may be demonstrated by complete or near complete exclusivity”. In overturning the lower court decision, the Court of Appeal noted that the individual was not working exclusively for the OCL, and that she was averaging only 39.9% of her annual billings from that organization. The Court stated that for the purposes of the dependent contractor test, “near exclusivity” requires substantially more than 50% of billings. If it were otherwise, exclusivity – the “hallmark” of the dependent contractor status – would be rendered meaningless.

For employers this decision clarifies that a dependent contractor relationship status can be found where there is total exclusivity between the worker and the organization, but where there is near exclusivity, substantially more than 50% of the contractor’s income will be required to be earned from the contracting party.

Bonus Payments – When is an Employee Entitled to a Bonus Payment during a Notice Period?

In Dawe v. Equitable Life Insurance Co. of Canada, the Court of Appeal recently reviewed the circumstances when an employee may be entitled to a bonus payment during a notice period.

The case involved an employee (“Mr. Dawe”) who had worked for Equitable Life Insurance as a Senior Vice President. Mr. Dawe’s employment was terminated in October 2015 after 37 years of employment. At trial, he was awarded thirty (30) months of reasonable notice, along with all bonuses that he would have earned during this period finding that the bonuses were an integral part of the compensation package. The Court of Appeal reduced the reasonable notice period to twenty-four (24) months given the absence of any exceptional circumstances that warranted a period beyond 24 months. On appeal, the employer argued that the employee was not entitled to the bonus payments during the notice period.

The Employee’s compensation package was comprised of a base salary and a cash bonus along with various other benefits. The bonus scheme changed throughout the years and Equitable Life imposed these changes unilaterally. The changes were not negotiated, nor were there any “sign off” required from those affected by the changes. In 2006, Equitable Life introduced two new bonus plans, a Long Term Incentive Plan (LTIP) and Short Term Incentive Plan (STIP) which both introduced new provisions that substantially limited employee’s bonus entitlements in circumstances of resignation, termination for cause, retirement, death and termination without cause. In the case of a termination without cause, the plans provided for a “Terminal Award” which was a prorated amount to the last day of “active employment” and required the employee to sign a Full & Final Release to get the payment.

In order for a bonus to be payable to an employee after a dismissal, the Courts have outlined the following test as stated by the Court of Appeal in the Paquette v. TeraGo Networks Inc. case:

  1. Was the bonus an integral part of the employee’s compensation package?
  2. If it was integral, is there any language in the bonus plan that would specifically remove the employee’s common law entitlement to payment?

At trial, the Court determined that the bonus was an integral part of the individual’s payment because of the fact that he was awarded the bonus with the exception of two years that he worked there, and the language within the plan describing it as “an integral component of Equitable executive cash compensation strategy”.

The Court of Appeal agreed with his assessment. Turning to the language in the Plan, the Court of Appeal agreed that there was clear language in the Plan that removed the employee’s entitlement to the payment during the notice period. However, while the clauses were sufficient to deny payment, the employer did not adequately implement the Plan or bring the provisions of the Plan to the attention of the employee, as it was imposed unilaterally and not brought to the attention of the employee at any time before the termination.

As a result, Mr. Dawe was entitled to a full bonus payment during the notice period. The result for employers is that where any bonus plan is provided to employees, employers need to ensure that there is very clear language addressing eligibility for the bonus payments upon termination. These provisions must be brought to the attention of employees and should not be imposed unilaterally.

Ontario Government Places Restrictions on Wage Increases

On June 5, 2019, the Ontario government introduced Bill 124 – the Protecting Sustainable Public Sector for Future Generations Act, 2019 – which imposes restrictions on wage increases and compensation for a variety of unionized and non-unionized workers in Ontario over the next 3 years.

The Bill establishes a series of 3-year “modernization periods” depending on whether an employer is unionized or non-unionized and the status of any collective agreement that may be in place. It applies to a wide range of employers, including every agency of the Crown, school boards, universities and colleges, public hospitals, non-profits, long-term care homes, children aids societies, the Ontario Power Generation and any not-for-for profit organization that receives more than $1 million in funding from the government. It does not apply to municipalities or for-profit entities.

The legislation provides that no collective agreement, arbitration award or employer may provide employees with an increase in salary rate that is greater than 1% per year during the 3-year modernization period. The legislation also imposes limits on incremental or new increases to overall compensation (1%), which is defined very broadly to include salary, benefits, perquisites and all forms of non-discretionary and discretionary payments to employees. Certain increases are exempt from the cap. The legislation does not prohibit an employee’s salary rate from increasing in recognition of an employee’s length of time in employment, an assessment of performance or the successful completion of a program or course of professional or technical education.

There are oversight mechanisms in the proposed legislation to ensure compliance such as the power for the Management Board of Cabinet to issue directives to employers to provide information related to collective bargaining or compensation for the purposes of ensuring compliance with the Act. Under the Act, the Minister may make an order declaring a collective agreement or any arbitration award is inconsistent with the Act. The legislation also imposes limits on the Ontario Labour Relations Board and arbitrators to inquire into the constitutional validity of the legislation or whether the legislation is contrary to the Ontario Human Rights Code. The legislation also protects employers against allegations related to constructive dismissal under the Ontario Employment Standards Act, 2000 or under the common law for compliance with the legislation.

The legislation is not yet proclaimed into law. In fact, the legislation will not likely be passed into law until October 2019 at the earliest. However, employers impacted by this legislation should be aware of this legislation as it will apply retroactively to June 5, 2019, meaning that any agreements, decisions or arbitration awards made after June 5, 2019, would be subject to the restrictions contained in the legislation. Please contact us if you have any questions about this proposed legislation or the potential impact that it may have upon your workplace.

Employer Liable for Employees Assaulting Each Other

In a recent 2019 decision, Bassanese v. German Canadian News Company Limited et al., the Court has concluded that an employer can be held vicariously liable where one employee assaults another employee.

This case involved two employees who did not like each other. Dhanani was employed as an accounts receivable clerk. Bassanese worked in an administrative position. The two employees did not get along. Bassanese, who was 73 years of age and had worked for the company for 19 years, alleged that Dhanani was abusive, unprofessional and harassing towards her over a prolonged period of time. She repeatedly complained to the President about incidents of harassment, yelling, screaming and derogatory insults by Dhanani directed at her.   In addition to the harassment, and abuse, Dhanani slapped Bassanese across the face three times. Bassanese complained again to the President and she filed a police report, her employment was terminated the same day.

Bassanese sued the company for wrongful dismissal and sought, in part, $100,000 in damages for assault and battery, $100,000 for intentional infliction of mental suffering and other damages against the company on the basis that it was vicariously liable for the acts of Dhanani. She also made claims against Dhanani personally, but those claims were settled.

The Court considered whether the employer should be vicariously liable for failing to provide an employee with a safe work environment. In Piresferreira v Ayotte, the Court determined that a corporation was vicariously liable for assault and battery after a supervisor shoved an employee, in the course of discharging their supervisory role.  The employee was a supervisor of the employee who had been physically assaulted. In making the determination that the employer was vicariously liable, the judge determined that the interactions relating to the assault and battery were integral to the supervisory role that the abuser held because of his employment. This same analysis was not done in the case of Bassanese, as neither employee was in a supervisory role to the other. Nonetheless, Bassanese was awarded the same $15,000 in damages against the company for the assault and battery of its employee.

This decision represents a reaffirmation that an employer can be held vicariously liable for the actions of its employees against other employees, including assault. For vicarious liability to be imposed against an employer for the actions of an employee, there must be an employment relationship and the act must be committed within the scope of the employment relationship. If the employee’s conduct is sufficiently connected to his or her employer, whether the act is authorized or not, the employer will often be liable. If the employee engages in an independent act outside of the employment relationship, the employer may escape liability.

It is notable that the case was not defended, so it is difficult to determine how this decision will be applied going forward and if any assault of an employee against another employee could result in automatic liability for an employer. In each case, the Court will consider the following factors: the employee’s position, scope of duties, and instructions and directions that may have been provided to the employee about proper or improper conduct.  The Court will interpret the notion of “acting within the scope of employment” very broadly so it is very important for the employer to be proactive in controlling the conduct of its employees through workplace policies, training and if necessary, appropriate disciplinary actions when misconduct occurs.

The Court rejected the claim against the Company for intentional infliction of mental suffering as there was no evidence of a visible and provable illness resulting from the harassment or assault. Although she was awarded $50,000 for aggravated damages arising from the manner in which she was terminated (ignoring her complaint and failing to investigate or take any steps to remedy the misconduct) and damages equivalent to 19 months of reasonable notice. In total, this employee was awarded damages totalling $194,433.17 arising in large measure from the employer’s failure to properly address a complaint of harassment between two employees. Employers should be aware that they have a statutory obligation pursuant to the Occupational Health and Safety Act to investigate any “incidents or complaints of workplace harassment”. This obligation is triggered as soon as an employer is aware of any possible harassment in the workplace and does not require a formal written complaint. As can be observed from this case, an employer can face significant liability if this responsibility is not taken seriously.

Constructive Dismissal for Hiring a new Employee

The Court of Appeal of Ontario has recently affirmed the Colistro v. Tbaytel decision from the Superior Court. This case involved allegations by an employee who commenced an action for constructive dismissal, intentional infliction of mental suffering, and wrongful dismissal.

Colistro worked for Tbaytel, and its predecessor, the City of Thunder Bay, for nearly 20 years. Tbaytel announced the hiring of a new employee as the Vice-President of Business Consumer Markets. Before Tbaytel had taken over from the City of Thunder Bay, the new employee was Colistro’s supervisor at the City of Thunder Bay. Before the new employee commenced his employment with Tbaytel, Colistro advised Tbaytel that she had been sexually harassed approximately 11 years earlier in her former employment by the potential new hire. Tbaytel made inquiries, and it was informed by the previous employer that the individual had not been interviewed regarding the allegations, and his employment was not terminated for cause, but the complaints against him were part of the reason of termination.

Tbaytel decided to hire the employee despite the concerns being expressed by Colistro. Tbaytel offered to provide accommodations to Colistro by transferring her to an equivalent position in a different building but this offer was refused. Colistro would not accept anything other than Tbaytel not hiring the new employee. Colistro went off work on stress leave and never returned to work. She was diagnosed with Post-traumatic Stress Disorder and depression. She commenced a claim seeking damages for constructive dismissal and intentional infliction of mental suffering.

Constructive Dismissal

Constructive dismissal arises when an employer’s conduct demonstrates an intention to no longer be bound by the employment contract. A constructive dismissal can arise either (a) when a specific term of employment (e.g. salary, hours of work) is unilaterally and fundamentally altered or (b) where the employer’s treatment of the employee makes continued employment intolerable, which typically arises when there is a failure to address harassment, bullying or violence in the workplace. In this case, the Court determined that continued employment was intolerable because of the employer’s decision to hire the new employee.

The trial judge found that Tbaytel’s actions made continued employment intolerable such that the decision to hire the employee amounted to constructive dismissal. The trial judge found that Tbaytel’s decision re-victimized Colistro and minimized the past conduct. The Court found that the employer’s decision to move forward with the hiring was demeaning and dismissive, and found that the employer decided to proceed with the hiring of an individual “whom they knew had previously sexually assaulted one of their apparently valuable employees, who had an unblemished 20-year history with the company” and who was vehemently opposed to her “abuser” being hired. She was awarded 12 months’ notice and $100,000 in compensatory damages arising from the manner of dismissal.

The employer appealed the decision. It argued that a single act by the employer cannot amount to constructive dismissal; namely, the communication with the employee that they had elected to proceed forward with the hiring. The employer argued that the subjective feelings of the employee, rather than an objective standard of reasonableness, could also not support the finding of constructive dismissal. The Court of Appeal rejected the appeal and concluded that a single act can determine a finding of constructive dismissal and that a single act can render continued employment intolerable. The Court of Appeal found that the trial judge’s conclusions on constructive dismissal were proper.  The Court of Appeal also noted the objective reasonable bystander test (what would a reasonable person do in the same circumstances?) was properly applied by the trial judge.

Intentional Infliction of Mental Suffering

The trial judge summarized the three elements of the tort of intentional infliction of mental suffering being the following: (a) flagrant or outrageous conduct; (b) calculated to produce harm; and (c) results in a visible and provable illness. The trial judge found that the first and third elements were established, the second element of the test was not. In order for the second part of the test to be made out, a plaintiff has to show that the defendant “intended to produce the kind of harm suffered or have known that it was almost certain to occur”. There was no allegation that the employer’s conduct was calculated to produce harm or that the harm (PTSD, or depression) was substantially certain to follow from hiring this employee. The Court of Appeal agreed that the damages claimed by the employee were not certain to follow from the decision to hire this employee.

This case indicates that previous history between employees may be a factor to consider when hiring a new employee. A question arises about how far an employer is required to investigate past allegations of harassment before hiring an individual. In this case, a factor was the existing relationship between the predecessor employer and the current employer. The current employer was in a unique position to make inquiries about what transpired 11 years ago, including having access to documents related to that harassment complaint. This may not be possible in the typical hiring scenario but the case does stand as a caution to employers to take complaints from existing employees about new hires seriously and to properly consider past allegations of harassment about individuals before making hiring decisions.