Termination of Employment

Employers often wish to enter new or updated employment agreements with existing employees. The driving force is typically that circumstances have changed, but it can also be that the employer simply wants different or additional terms. However, the employer must give the employee valid consideration, otherwise the new or updated agreement will not be enforceable.
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The Ontario Court of Appeal has reiterated that, barring exceptional circumstances, reasonable notice for dismissal without cause will not exceed 24 months. The Court partially overturned the lower court’s decision in Dawe v The Equitable Life Insurance Company of Canada, which also ruled on the enforceability of unilateral changes to the employer’s bonus plan.
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In 2016, the Ontario Court of Appeal confirmed that dependent contractors are entitled to reasonable notice of termination. In a recent decision, Cormier v 1772887 Ontario Limited cob as St. Joseph Communications, (“Cormier“) the Ontario Superior Court of Justice extended this principle – commenting that service as an independent contractor should be considered in calculating the reasonable notice period in certain circumstances.
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The Supreme Court of Canada will decide if an employee is entitled to payments owed in the event of a corporate acquisition despite the fact that the employee resigned over a year before the triggering event. On January 31, 2019, the SCC granted leave to appeal in Matthews v. Ocean Nutrition Canada Limited. The employee asserts that he is entitled to over $1 million in profits following the acquisition of his former employer – even though he had resigned 13 months before the transaction. If the SCC decides in the employee’s favour, employers may face more challenges (and increased litigation) when seeking to enforce limiting clauses in employment agreements.
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After-acquired cause, by definition, arises when an employer discovers just cause for termination after the employee has been dismissed on a without cause basis. This begs the question: Can an employer assert after-acquired cause when it has reason to suspect just cause prior to the termination, but proceeds on a without cause basis due to the employee’s representations of innocence? The Ontario Court of Appeal has answered affirmatively.
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Surprisingly, evidently not. Briefly the facts in Plate v. Atlas Copco Canada Inc., 2019 ONCA 196: an Executive in the role of Vice President Global Strategic Customers was terminated for just cause grounded in a decades-long defrauding of the company and its benefits provider in conspiracy with the latter’s consultant, to the extent of over $20,000,000, over a million of which resulted to the Executive personally. His argument that he was a bystander incidentally enriched to the knowledge of the employer failed, conviction entered, no appeal pursued.

In the course of the criminal process the Court readily found that the Executive was a “fiduciary”, a formidable position of trust: the duty of replete fidelity, selfless devotion to the “beneficiary” (here the employer), compelling so-called “righteousness” behaviour.
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Faith-based, as in “good faith”, that is.

Not that long ago the Supreme Court installed “good faith” as core to the fabric of contractual relations in Canada whether commercial or employment, whether ostensibly arms-length as “independent contractor” or employment per se. Implying a duty to act fairly in contract is not foreign to other jurisdictions— it is foundational to EU legal principals and long-since present in the Restatements of US law.

Here, not so much. In the 60s Ontario Justice Goodman enthused about incorporation of “good faith” as a distinct implied term of contract; alas conservative sentiment rendered that distillation jurisprudential ‘moonshine’. Some 50 years on Bhasin v. Hrynew (2014) refined that elixir into single malt: the SCC aspirationally confirmed that we all gotta have ‘faith’.

While it remains difficult to be ‘sort-of pregnant’, good faith became operational but not as an independent “cause of action”. But as an influencer of import in contractual relations, it has certainly come of age: Mohamed v. Information Systems Architects Inc., 2018 ONCA 428.
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Employers commonly receive calls from Employment Insurance (EI) Officers seeking clarification of the information provided by the employer in a Record of Employment (ROE). The clarification or confirmation typically relates to the employee’s first / last day worked, insurable hours, insurable earnings and / or the reason for issuing the ROE (Block 16).

Employers who are asked to speak to their reason for issuing the ROE should pause and consider what, if any, information to share with the EI Officer. Employers should also carefully consider what steps to take upon receipt of correspondence from the EI Officer or the Canada Employment Insurance Commission (Commission).
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This is part two in our series on recent Ontario Superior Court decisions that employers should be aware of before finalizing future employment agreements. See here for our first part, on the recent trend of lengthy notice period awards for long service employees of advanced age.

As most employers know, unenforceable termination clauses often give rise to costly wrongful dismissal claims. Yet the case law in this area is constantly evolving, and it is increasingly challenging to stay abreast of what a court will consider to be enforceable.
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