In the recent case of Preston v. Cervus Equipment Corporation, Ontario’s Court of Appeal offered employers a friendly reminder that well-drafted settlement documents will survive judicial scrutiny.

Key Takeaways for Clients

Preston underscores the necessity of clear and precise language in settlement agreements. Employers should use broad and inclusive release language that can encompass a wide range of claims, even those not explicitly mentioned. By carefully drafting settlement agreements, employers can ensure that the settlement documents have the intended effect of concluding the employment relationship without courts stepping in to frustrate the finality of the settlement documents.

Background

The case revolves around the interpretation of a release and indemnity clause in the settlement documents signed by Mr. Preston after his termination from Cervus Equipment Corporation. Mr. Preston was employed by Cervus from 2014 to 2018 and participated in the company’s Deferred Share Plan.

Upon his termination without cause in January 2018, Mr. Preston had 4,964.04 vested stock units valued at $75,949.81 and 4,499 unvested stock units. Cervus informed him that his vested stock units could be exercised according to the Plan and offered him a severance package of 15 weeks’ pay in lieu of notice. The parties then discussed and settled the matter. The settlement documents included a broad release of claims, which Mr. Preston signed after receiving independent legal advice.

Notably, the release language in the settlement documents did not specifically refer to the stock plan and vested stock units in question, but did reference that Mr. Preston was releasing all claims connected to his employment, and that he had no entitlement or claim with respect to any bonus, share award, stock option, or similar plan that his employer had offered to him.Continue Reading Ontario’s Court of Appeal Highlights the Importance of Respecting Broad Release Language in Employment Settlement Agreements

Changes to the capital gains inclusion rate and the employee stock option deduction rate (as proposed in Budget 2024) will apply to stock options exercised and shares sold on or after June 25, 2024

The new measure reduces the stock option deduction and capital gains tax exemption from 1/2 of the taxable amount to 1/3 of the taxable amount, if an individual’s annual combined limit of CAD 250,000 has been exceeded. The individual taxpayer can choose how to allocate the preferential tax treatment between the stock option income and capital gains to the extent the combined limit has been exceeded. 

There is still uncertainty as to how employers should manage tax withholding on stock option income (i.e., apply a 1/2 or 1/3 exemption), given they would not be in a position to know whether the combined limit has been reached by the employee and how the employee has chosen to allocate the exemptions. Further technical changes in the legislation are expected to be introduced at the end of July 2024 that may provide additional clarification on this point. For now, it may be reasonable for employers to assume that only 1/3 of the stock option income is exempt and withhold taxes accordingly and leave it up to the employees to claim the 1/2 deduction (if available) when they file their individual tax returns. Continue Reading Changes to Taxation of Stock Options and Capital Gains – Effective Immediately

In this 75-minute “quick hits” style session, our team provided practical advice to Canadian in-house counsel and human resources leaders and addressed what to keep top-of-mind for 2024.

Among other topics, we discussed:

  • Implications of Pay Transparency Legislation in British Columbia and
  • We are pleased to share a recent Benefits Canada article, “Employers can’t rely on original termination clauses when employee responsibilities increase: court,” with quotes from George Avraam. A recent Ontario Court of Appeal decision upheld a motion judge’s award of over $400,000 to an employee on the basis of the changed substratum doctrine. The case

    Special thanks to Oscar Ramirez (articling student in our Toronto office) for co-authoring this blog.

    In Celestini v. Shoplogix Inc., 2023 ONCA 131, the Ontario Court of Appeal recently upheld a motion judge’s award of over $400,000 to an employee on the basis of the changed substratum doctrine.

    What is the changed substratum doctrine?

    The changed substratum doctrine recognizes that the employment relationship evolves over time such that sometimes it may be inappropriate to apply the provisions of an out-dated employment contract to a job that has changed significantly. The doctrine applies in situations where the employee’s duties have fundamentally expanded to a point where the underlying employment contract has substantially eroded, or it can be implied that the employment contract could not have been intended to apply to the employee’s latest role.

    Factual background

    In 2005, Mr. Celestini became Shoplogix Inc.’s Chief Technological Officer through a finance arrangement with a venture fund. As part of the deal, he would step down as Shoplogix’s CEO and serve as its CTO under a written employment contract, which he signed in 2005. The employment contract limited Mr. Celestini’s entitlements upon termination of employment.

    In 2008, Mr. Celestini and Shoplogix entered into an Incentive Compensation Agreement (“ICA“) which significantly altered Mr. Celestini’s bonus entitlements. Shoplogix did not amend the 2005 employment contract at this time.

    There was an expansion of Mr. Celestini’s workload and responsibilities that coincided with the execution of the ICA and a change in leadership. His new responsibilities included: “managing important aspects of sales and marketing; directing managers and senior staff who were reassigned to report to him; travelling to pursue international sales; handling all of the company’s infrastructure responsibilities; and soliciting investment funds.”

    In 2017, Shoplogix terminated Mr. Celestini without cause. Shoplogix took the position that Mr. Celestini’s rights were governed by the employment contract he signed in 2005. But Mr. Celestini argued that the termination provisions in the 2005 contract were unenforceable because of the substantial changes to his position, and he was therefore entitled to reasonable notice at common law. He claimed he was entitled to common law damages for wrongful dismissal on the basis that Shoplogix breached the implied term to provide reasonable notice of termination.Continue Reading The Changed Substratum Doctrine Strikes Again – Ontario Court of Appeal Upholds Massive Damages Award Where Employee’s Duties Significantly Expanded

    Special thanks to Brendan O’Grady (a senior associate in our Litigation & Government Enforcement Practice Group) and Anton Rizor (articling student in our Toronto office) for co-authoring this blog.

    In Flesch v Apache Corporation, the Alberta Court of Appeal (“ABCA”) upheld the certification of an employee class action arising out of the cancellation of

    As we near the end of 2022 and bonus season is right around the corner, now is a great time for employers to review and update their employment agreements. In order to make changes to an existing employment agreement, the employer must give the employee “consideration.” Without consideration, the changes would not be enforceable.

    Consideration

    Background

    The federal government passed Bill C-3, An Act to amend the Criminal Code and the Canada Labour Code on December 17, 2021. While Bill C-2 focused on providing support for reasons specifically related to COVID-19, Bill C-3 enhances paid sick leave and bereavement leave under the Canada Labour Code (the “CLC”) not specific to

    Background

    Just before the end of 2021, the Canadian Government passed Bill C-2, An Act to provide further support in response to COVID-19. Amongst other things, the Bill introduced the Canada Worker Lockdown Benefit Act, amended eligibility requirements under the Canada Recovery Benefits Act, and amended the Canada Labour Code to update

    On July 30, 2021, the Federal Government announced its proposal to extend certain COVID-19 support programs, including the Canada Emergency Wage Subsidy (“CEWS”), Canada Recovery Benefit (“CRB”), the Canada Recovery Sickness Benefit, and the Canada Recovery Caregiving Benefit until October 23, 2021.

    Summary of Key Changes in the Federal Government’s Announcement

    The key changes from